We kick off today’s update with additional details regarding how iPhone production at Foxconn’s facilities at Zhengzhou is trending. The discussion goes over further refinement in Neil’s estimates/assumptions for the shortage in iPhone sales in FY1Q23 arising from the Zhengzhou protests/riots. The update concludes with a look at the WSJ’s article about iPhone production in China. After going over why the WSJ’s headline is misleading, we discuss Apple’s product assembly strategy.

Hello everyone. Welcome to a new week.

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Additional Details on “iPhone City” Production

In an article published late Sunday, here’s Reuters:

“Apple supplier Foxconn expects its COVID-hit Zhengzhou plant in China to resume full production around late December to early January, a Foxconn source said on Monday, after worker unrest last month disrupted the world's biggest iPhone factory.

The Zhengzhou plant has been grappling with strict COVID-19 restrictions that have fuelled discontent among workers over conditions at the factory. Production of the Apple device was disrupted ahead of Christmas and January's Lunar New Year holidays, with many workers either having to isolate to combat the spread of the virus or fleeing the plant.

Following the November unrest, that saw workers clash with security personnel, Foxconn could have seen more than 30% of the Zhengzhou site's November production affected, Reuters reported last month citing a source familiar with the matter. Foxconn hasn't disclosed details of the impact of the disruption on its production plans or finances.

‘The capacity is now being gradually resumed’ with new staff hiring under way, said the person with direct knowledge of the matter. The person declined to the named as the information was private.

‘If the recruitment goes smoothly, it could take around three to four weeks to resume full production,’ the person said, pointing to a period around late December to early January.”

Given Foxconn’s recent attempts at spinning negative news, we need to approach this latest reporting with some skepticism. Foxconn has reason to downplay the potential production impact at Zhengzhou resulting from weeks of employee unrest.

With that said, the Reuters report didn’t come across to me as overly positive. Instead, Reuters’ Foxconn source pointed to full production at Zhengzhou still being a ways off.

Last week, we assumed “Apple loses three weeks of Zhengzhou production [in November], followed by four to five weeks of reduced production.” Based on Reuters’ newest article and having more time to dive a bit more into the granular details, we can refine that assumption into:

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