Foxconn Keeps Chinese Factories Running Under Coronavirus Lockdown

Taiwan-based Apple supplier Foxconn said on Wednesday that two of its facilities in China had resumed limited operations under a “closed-loop” management system, which essentially means the employees are quarantined on the premises while the surrounding Chinese city of Shenzhen is subjected to a coronavirus lockdown.

Shenzhen, the major tech hub city at the heart of “China’s Silicon Valley,” was placed under coronavirus lockdown on Monday, three days after the vital industrial hub city of Changchun. The Shenzhen quarantine alarmed business interests around the world not only because tech giants like Foxconn have important facilities in the city but because a great deal of global shipping passes through Shenzhen’s ports.

Foxconn said on Wednesday that two days after Shenzhen was locked down, the Chinese government gave it permission to resume operations on “campuses that have both employee housing and production facilities,” provided “required health measures” were enforced for employees living at the facilities.

Foxconn has two such campuses in Shenzhen, located in the districts of Longhua and Guanlan. Both were allowed to begin production again on Wednesday, on the theory that the employees are working from home, and their home happens to be the factory.

Foxconn pledged to “work closely with the relevant authorities in monitoring these operations very closely,” a rather jittery statement that suggests any coronavirus outbreak at the campuses or breaches of heavily-monitored pandemic protocol could swiftly shut them down again.

Shenzhen officials said other companies could resume work-from-home operations, but public transportation will remain closed, and the city will be largely sealed off until at least March 20, during which time three rounds of coronavirus testing will be conducted across the city.

The Shenzhen lockdown was ill-timed for Foxconn because Apple just announced its latest round of new products, including a low-price iPhone hotly anticipated in Asian markets. Fortunately for Foxconn, it long ago moved much of the production for Apple components out of Shenzhen because the labor market was growing too expensive. Foxconn has maintained since the Monday lockdown announcement that it can shift production lines enough to keep Apple’s new product rollout on schedule.

Foxconn analysts introduced a note of caution on Wednesday, warning that production shifting will only work in the “short term,” so serious disruptions could occur if there is a “significantly higher duration of lockdown.”

“An increased period of shutdowns can cause ripple effects at other components that can create a shortfall in production,” the analysts added.

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