Bulletin: Hon Hai May Quicken Its Geographical Diversification Amid China's Strict COVID Policy

HONG KONG (S&P Global Ratings) Nov. 7, 2022--The COVID-19 lockdown in Zhengzhou, China, is likely to hit Hon Hai Precision Industry Co. Ltd.'s iPhone shipments. In our view, Hon Hai faces downside risk in its revenue growth, particularly in 2023. This stems from the possibility that Apple could advance its effort to spread production-related risks for its high-end iPhones by diverting orders to other electronics manufacturing services providers, given China's zero-COVID policy is unlikely to change soon. We believe it is difficult for Hon Hai (A-/Stable/--) to return capacity utilization in Zhengzhou to normal in a short period. This is despite the company's restrictions on the movement of workers at the plant during the pandemic. Hon Hai could also incur

...November 6, 2022 HONG KONG (S&P Global Ratings) Nov. 7, 2022--The COVID-19 lockdown in Zhengzhou, China, is likely to hit Hon Hai Precision Industry Co. Ltd.'s iPhone shipments. In our view, Hon Hai faces downside risk in its revenue growth, particularly in 2023. This stems from the possibility that Apple could advance its effort to spread production-related risks for its high-end iPhones by diverting orders to other electronics manufacturing services providers, given China's zero-COVID policy is unlikely to change soon. We believe it is difficult for Hon Hai (A-/Stable/--) to return capacity utilization in Zhengzhou to normal in a short period. This is despite the company's restrictions on the movement of workers at the plant during the pandemic. Hon Hai could also incur additional costs, such as overtime pay and incentive bonuses, to retain its workforce and support utilization rates. Its Zhengzhou plant has about 200,000 workers and is the major iPhone manufacturing base for Hon Hai....

Bulletin