The iPhone producer had been allowed to return to work to its Zhengzhou plant sending futures to overnight highs…
from Zero Hedge
Following last night’s confusion whether the world’s largest electronics maker, Taiwan’s Foxconn, would resume operation at its Zhengzhou and Shenzhen plants, with Reuters stating the iPhone producer had been allowed to return to work to its Zhengzhou plant sending futures to overnight highs, even as the Nikkei countered shortly after that that was not the case, moments ago Reuters once again chimed in, reporting that in addition to approval to restore operations at its main plant in Zhengzhou, which employs over 350,000 workers and makes half the world’s iPhones, Foxconn has also received approval to resume partial production at its Shenzhen plant:
- FOXCONN HAS RECEIVED APPROVAL TO RESUME PARTIAL PRODUCTION FOR KEY PLANT IN CHINESE SOUTHERN CITY OF SHENZHEN ON TUESDAY – SOURCE WITH DIRECT KNOWLDEGE: RTRS
The two factories together make up the bulk of Foxconn’s assembly lines for Apple’s iPhones, and the delays are likely to impact global shipments. Ahead of the news, market research firm Trendforce on Monday cut its March-quarter forecast for iPhone production by about 10% to 41 million handsets.
That said, it wasn’t necessarily clear what “resuming production” actually means, because in a separately headline, Reuters said that only about 10% of the workforce had returned to Shenzhen (it was unclear what percetnage of Zhenghou workers had returned):
- ABOUT 10% OF WORKFORCE HAS RETURNED TO FOXCONN’S PLANT IN SHENZHEN AS OF MONDAY-SOURCE WITH DIRECT KNOWLEDGE: RTRS
Similarly, under 10% of Foxconn’s workforce in Zhengzhou had returned to the plant, the Reuters 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.
Lack of details aside, the government’s permission for Foxconn to resume production and thus keep supply chains alive was quickly interpreted by the market as a stamp of confidence by Beijing that it would contain the virus. As for the return of just 10% of workers to the factory, Rabobank’s Michael Every put it best: “it was enough to fool the algos, but not enough to mean much to supply chains.” Then again, fooling the algos is all that matters and the Emini is now trading at session highs and rapidly approaching its all time highs:
But interestingly, AAPL shares are much less enthused by the AAPL news that is driving the broad market algos.
A similar dynamic was observed earlier in Tesla shares which soared as much as 8% in early trading after the electric-car maker resumed production at its China factory with the help of the Shanghai government. As Bloomberg notes, Shanghai government officials said during a briefing Saturday that it would make all efforts to help key companies including Tesla return to normal production. Tesla shares lost some steam toward the end of last week after analysts at RBC Capital Markets and Canaccord Genuity warned that the shutdown of the factory posed risk to its business plans, including a target for at least 500,000 vehicle deliveries in 2020.
Automakers including Volkswagen, Toyota Motor Corp. and Honda Motor Co.have meanwhile extended shutdowns, with several of their China factories now scheduled to resume production no sooner than Feb. 17.