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Profits at iPhone Supplier Foxconn Crumble 90% in Q1

By Rich Duprey – May 15, 2020 at 10:07AM

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The rest of the year is looking murky, too, as Apple pushes back its flagship product's release date.

Apple's (AAPL -2.54%) primary iPhone supplier Foxconn said the COVID-19 pandemic caused first quarter profits to plunge 90% year over year after factories were closed in February.

While profits are also expected to be down in the second quarter, the company anticipates single-digit percentage declines, though Foxconn says it has limited visibility with how the rest of the year will play out.

Empty factory floor

Image source: Getty Images.

A ripple effect

The impact of the coronavirus outbreak is causing a delay in the release of Apple's new iPhone models due to lowered consumer demand and production delays elsewhere in Asia. 

Although The Wall Street Journal reports that Foxconn itself wouldn't comment on what that would mean for new product introductions, reports last month indicated that Apple could be delaying its four new iPhone designs.

Apple typically ramps up mass production during the summer to build up inventory in August ahead of a mid-September debut. However, this year it will push back the production ramp while also cutting the number of handsets it will manufacture in the second half of 2020 by 20%.

Foxconn also reportedly stopped hiring people at its iPhone facility in Zhengzhou in anticipation of Apple's cutbacks.

Apple first saw production impacted by tariffs during the trade war with China. Because of the backlash over China's role in the spread of the coronavirus, the Trump administration is considering reimposing tariffs on Chinese-made products.

Foxconn, however, has plants around the world, in Brazil, Mexico, Vietnam, the Czech Republic, and the U.S.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

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