Apple's main iPhone maker Foxconn got the green light on Monday to reopen two major plants in China closed because of the coronavirus and aims to resume production even though only 10% of the workforce has returned so far, a source told Reuters.
Foxconn, the world's largest contract electronics maker, got approval to resume work at factories in the eastern central Chinese city of Zhengzhou and in the southern manufacturing hub Shenzhen, the person with direct knowledge of the matter said.
The two factories together make up the bulk of Foxconn's assembly lines for Apple's iPhones and any further delays to production following the enforced closures are likely to hit global shipments.
"As a matter of policy and for reasons of commercial sensitivity, we do not comment on our specific production initiatives," Foxconn said in a statement to Reuters.
In Zhengzhou, about 16,000 people, or less than 10% of the workforce, had returned to Foxconn's plant as of Monday while in Shenzhen about 20,000 workers, or roughly 10% of the workforce, were back after the Lunar New Year holiday, the source said.
"Shenzhen plant has notified employees to return to work tomorrow," said the person who declined to be identified because they are not authorised to speak publicly on the matter.
"Work there will be resumed in a staggered and orderly manner," the person said. "But a big challenge remains after factory resumption due to the severe situation of the outbreak."
Market research firm Trendforce on Monday cut its forecast for iPhone production in the first three months of the year by about 10% to 41 million handsets.
Apple gave a wider range than usual for estimated revenue in the first quarter to factor in uncertainty due to the virus that has killed over 900 people and infected more than 40,000.
An Apple spokeswoman in Shanghai was not immediately available for comment.
Foxconn reported on Monday a 12% drop in revenue in January from a year ago to 364.6 billion Taiwan dollars ($12 billion). It did not give further details.
Its shares fell as much as 2.4%, underperforming a 0.3% decline in the broader market. Foxconn has fallen more than 11% since the market reopened after the holiday break.
Apple rival and China's biggest smartphone maker, Huawei , said last week it had resumed production of consumer devices and telecommunications equipment and that its operations were running normally.
Foxconn executives were trying very hard to negotiate with the Chinese authorities to resume production in other parts of the country, including Kunshan in southeastern Jiangsu province, the source with direct knowledge of the matter told Reuters.
The coronavirus epidemic - declared a global health emergency by the World Health Organization - has disrupted Chinese manufacturing and forced firms such as Hyundai Motor to halt production of cars in some factories.
Some companies, including Samsung Electronics, limped back to work on Monday but hundreds of factories and stores remain shut across China.
Foxconn, formally Hon Hai Precision Industry Co Ltd, said earlier on Monday that employee safety was its top priority and it was working with authorities to meet requirements to resume production across China in a staggered fashion.
Foxconn employees who returned on Monday following the extended Lunar New Year holiday have been told to wear masks, undergo temperature checks and adhere to a specified dining system, according to internal memos seen by Reuters.
Most senior Taiwanese officials have been told to refrain from returning to China and those who needed to do so required approval from Chairman Liu Young-Way, the person said.
Foxconn, which makes devices for global electronics firms, has also built production lines in the southern province of Guangdong to make face masks for its hundreds of thousands of employees and is aiming to churn out 2 million masks a day by late February, the internal memos showed.