'China iPhone Base' Locked Down, 3 Million Units Production Cut Expected... Korean Companies "Watching Closely" (Comprehensive)

TrendForce "Up to 5 Million Units Decrease Expected in Q1 Next Year"
Panel and Camera Module Suppliers Also Affected
Some Companies Cautious, Saying "Still a Rumor"

On the 7th, when Apple's new iPhone 14 series was officially released in Korea, citizens were examining the products at the Apple Store in Myeongdong, Jung-gu, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Moon Chaeseok] The Chinese government has temporarily shut down the world's largest Apple iPhone production factory to prevent the spread of COVID-19, prompting workers to attempt to escape, which is expected to have ripple effects on Korean companies supplying products to Apple. Analysts have suggested that Apple’s iPhone shipments in the fourth quarter could decrease by approximately 2 to 3 million units.

According to the industry on the 3rd, starting from the 2nd (local time), the Chinese government issued a seven-day closure order for the industrial complex housing Foxconn’s factory in Zhengzhou, Henan Province, leading to a mass escape of factory workers. This measure was taken after the number of COVID-19 cases surged from 95 to 359 in just one day. Following this, Foxconn workers began fleeing the factory, increasing the likelihood of reduced production of Apple products such as the iPhone.

If Foxconn’s factory production decreases or halts, Apple, as the set (finished product) company, will inevitably have to adjust shipment volumes on a corporate level. This will likely place considerable pressure on component suppliers affiliated with Samsung and LG, known to supply Apple. Samsung Display, LG Display, and LG Innotek provide panels and camera modules for the iPhone 14 Pro and Pro Max lineups.

Several industry insiders expressed cautious responses, stating that while it is difficult to mention transactions with the so-called 'gap (甲)' set companies, there is no immediate significant impact, and they are closely monitoring the situation. However, component suppliers believe that even Apple would find it difficult to drastically reduce shipments of the latest premium product, the iPhone 14, in a short period. An anonymous component supplier official said, "So far, no unusual or fluctuating management issues have been detected following the Foxconn workers’ escape," adding, "Foxconn only has other production lines within China, and Apple is also unlikely to significantly reduce premium model production, so we will carefully observe the situation."

However, there is indeed a temperature gap between domestic industry observations and global market analyses. Although the 'Foxconn risk' may not be an immediate 'fire on the roof' as domestic companies suggest, it is difficult to be complacent. According to major foreign media reports citing Foxconn production line insiders, Apple has reportedly planned to reduce iPhone production by at least 30% and up to 50% this month.

Taiwanese market research firm TrendForce also diagnosed, "(Due to the closure in Zhengzhou, Henan Province, China) the iPhone production line operating rate has dropped to about 70%," adding, "It will be difficult to restore the operating rate to normal levels in the short term." TrendForce forecasted, "Due to the decline in production line operating rates, fourth-quarter iPhone shipments are expected to decrease by 2 to 3 million units from the target of 80 million units," and added, "Currently, the total iPhone shipments for this year are expected to be about 237 million units."

There is even speculation that shipments could decline through the first quarter of next year, attributed to the significant impact of China’s zero-COVID policy. TrendForce stated, "iPhone shipments for the first quarter of next year were expected to be 52 million units, but if China continues its zero-COVID policy, shipments could decrease by 4 to 5 million units," adding, "The reduction in iPhone shipments in the first quarter of next year could expand to over 20%." They further noted, "Apple plans to shift contract manufacturing to Pegatron and Luxshare to diversify production risks for the iPhone Pro series," and added, "iPhone shipments from new production lines could begin as early as the first quarter of next year."

Component companies known to be trading with Apple, as well as those with a rich customer portfolio including Galaxy, are equally monitoring the situation closely. A representative from one such company said, "We are currently considering entry into supply for major customers’ new products in the fourth quarter."

Foxconn, headquartered in Taiwan, is the largest manufacturer of Apple iPhones. The Zhengzhou Foxconn factory produces 80% of the iPhone 14 series and over 85% of the iPhone 14 Pro. The iPhone 14 series, launched by Apple last September, is a premium product that serves as Apple’s cash cow.

This content was produced with the assistance of AI translation services.