(Yicai Global) Oct. 31 -- The recent Covid-19 outbreak in Apple's largest global production base overshadows more than 10 percent of the global iPhone production capacity, according to an analyst.

Hon Hai Precision Industry, the parent company of Foxconn, has entered a "closed-loop" management system at the plant in central China's Zhengzhou, which could have an impact on the Apple contract manufacturer's output, Kuo Ming-chi, analyst at Tianfeng International Securities, said yesterday. The Covid-era system means that employees only interact with co-workers, sleeping in the factory.

The Zhengzhou industrial park is cooperating with the local government in Henan province to control the pandemic situation while Foxconn will coordinate with other plants to support the production to reduce the possible impact, the New Taipei-based firm said in its latest statement.

Foxconn affiliates' shares dropped after the announcement. FIH Mobile [HK: 2038] closed 4.9 percent lower at HKD0.64 (US 8 cents). Foxconn Industrial Internet’s stock price [SHA: 601138] slipped 1 percent to CNY8.20 (USD1.10).

Foxconn’s capacity is expected to improve gradually in the coming weeks, so the pandemic control measures are predicted to have a limited impact on output in the fourth quarter, Guo said, adding that Apple has not changed its total iPhone output estimate.

The American firm is checking its options as it is discussing with Taipei-based Pegatron and Shenzhen's Luxshare Precision Industry to upgrade some production lines for iPhone 14 and iPhone 14 Plus to make iPhone 14 Pro and iPhone 14 Pro Max, Guo said. But Luxshare, a connector cable maker that reported lower 2021 revenue than Foxconn did per month, could churn out its first iPhone 14 Pro in the first quarter of 2023 at the earliest.

China has the biggest global share of Apple suppliers. The California-headquartered technology giant had 190 suppliers last year, and more than 50 of them were based in China's mainland, according to Apple's report released this month. Meanwhile, Foxconn’s plant in Zhengzhou is Apple’s largest production base in the world with more than 90 production lines and about 300,000 workers.

Foxconn is important for the province as the manufacturer's foreign trade made up as much as 67.5 percent of Henan’s imports and exports in 2015, rising from nearly 29 percent in 2011. The clustering effect is apparent as several smartphone brands have entered the Zhengzhou Airport Economy Zone, following the major manufacturer.

The value of China’s smartphone exports accounted for 27 percent of global smartphone sales in 2019, with a quarter of that coming from Henan, according to IDC data.

Editors: Shi Yi, Emmi Laine, Xiao Yi