Top Apple iPhone maker Foxconn restarts key China plant with 10% of workers -source

By Yimou Lee

TAIPEI (Reuters) - Apple's biggest iPhone maker Foxconn <2317.TW> got approval to resume production at a key plant in China after being forced to shut it following the coronavirus outbreak, but only 10% of the factory's workforce has managed to return so far, a source told Reuters.

Taiwan's Foxconn, the world's largest contract electronics maker, got the green light to restart production in the eastern central Chinese city of Zhengzhou, said the person with direct knowledge of the matter. The company, however, has not yet been allowed to restart production in Shenzhen, a southern manufacturing hub, the source said.

The two factories together make up the bulk of Foxconn's assembly lines for Apple's <AAPL.O> iPhones, and the delays are likely to impact global shipments.

Market research firm Trendforce on Monday cut its March-quarter forecast for iPhone production by about 10% to 41 million handsets.

Apple itself gave a wider-than-usual revenue outlook range for the March quarter last month to factor in uncertainty due to the virus that has claimed more than 900 lives and infected over 40,000 people.

An Apple spokeswoman in Shanghai was not immediately available for comment.

Apple rival and China's biggest smartphone maker, Huawei [HWT.UL], said last week it had resumed production of consumer devices and carrier equipment, and operations were running normally.

About 16,000 people, or under 10% of Foxconn's workforce in Zhengzhou have returned to the plant, the source said, adding that company executives were trying very hard to negotiate with authorities to resume production in other parts of China, including Kunshan, in southeastern Jiangsu province.

"Our request to resume production (in Shenzhen) was disapproved. We need to improve our virus control measures for another check," said the person who declined to be identified because they are not authorised to speak publicly on the matter.

Shenzhen authorities will conduct checks at the plant again later this week, the person said.

Employees in Shenzhen were told not to return to work on Tuesday, according to an internal memo seen by Reuters.

The coronavirus outbreak - declared a global health emergency by the World Health Organization - has disrupted Chinese manufacturing and forced companies such as Hyundai Motor <005380.KS> to halt production of cars in some factories.

Some companies including Samsung Electronics <005930.KS> limped back to work on Monday but hundreds of factories and stores remain shut across China.

Foxconn, formally Hon Hai Precision Industry Co Ltd, said in a statement that employee safety was top priority and that it was working with authorities to meet requirements to resume production across China "in a staggered and orderly manner".

Foxconn employees who returned to work on Monday following an extended Lunar New Year holiday have been told to wear masks, undergo temperature checks and adhere to a specified dining system, according to internal memos seen by Reuters.

Most senior Taiwanese officials have been told to refrain from returning to China and those who needed to do so required approval from Chairman Liu Young-Way, the person said.

Foxconn, which makes devices for global electronics firms, has built its own production lines in the southern province of Guangdong to make masks for its hundreds of thousands of employees, targeting two million masks a day by late February, the memos showed.

The company reported an 11.96% drop in its January revenue from a year ago to T$364.6 billion ($12.12 billion), according to a Foxconn filing to the Taiwan stock exchange. It did not give further details.

Foxconn shares fell as much as 2.4% in Monday trade, lagging a 0.3% decline in the broader market <.TWII>. They have fallen more than 11% since the market reopened following the Lunar New Year break.

(Reporting by Yimou Lee and Taipei newsroom; Additional reporting by Brenda Goh in Shanghai; Writing by Ben Blanchard; Editing by Sayantani Ghosh/Jacqueline Wong/Susan Fenton)