Confusion After Nikkei Denies Reuters Story That Foxconn Will Restart Production At Key Plant

Update: after futures sprinted into the green following a Reuters report that Foxconn had received Chinese government approval to resume production at a key plant in the northern China city of Zhengzhou, Nikkei now denies this, reporting that "Foxconn's plan to resume production on Monday has been called off by the Chinese authorities due to worries surrounding the coronavirus outbreak"

The Japanese publication adds that "the action further worsens the supply chain disruption for global electronics companies, including Apple, Amazon, Google and Huawei. Foxconn is the world's biggest iPhone assembler, and it makes Huawei smartphones and Amazon Kindle tablets as well as echo speakers, while it also supplies HP, Dell and most the major electronics brands."

Public health experts in Shenzhen informed Foxconn, which trades as Hon Hai Precision Industry, that its factories there face "high risks of coronavirus infection" after conducting on-site inspections and therefore are not suitable to restart work, four people familiar with the matter told Nikkei.

"Violation of epidemic prevention and control could potentially face the death penalty," the internal meeting memo seen by the Nikkei Asian Review said. More importantly, Foxconn's Zhengzhou complex, which according to Reuters would reopen on Monday, also canceled plans to resume work on Monday, they said.

As for S&P futures, they continue to trade in the green, and far above overnight lows of 3303.50, refusing to believe the denial of the report that sent them higher.

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With traders anxiously eyeing the surge in overnight coronavirus deaths in China as evidence the pandemic is far from contained, amid fears that China will not be able to reopen for business tomorrow despite the government's assurance that somehow everything will be ok on Feb 10 and supply chains will once again be humming as before, futures slumped in early trading, but promptly erased losses of as much as 0.7%...

... after Reuters reported that Apple's main iPhone production partner and fab, Taiwan's Foxconn, also known as Hon Hai Precision Industry, had received Chinese government approval to resume production at a key plant in the northern China city of Zhengzhou, where half of the world's iPhones are made.

Earlier in the day, Bloomberg reported that Foxconn's factories worldwide are coordinating with authorities in carrying out virus protection and are preparing safety measures with the approval of local governments.

“Our group hasn’t received any client requests to move production resumption earlier,” Foxconn said in a statement Saturday, adding that operating schedules will be arranged according to local governments’ requirements.

But as Reuters notes it's not all clear, and the company is still in talks with the government to resume production at another plant in the southern Chinese city of Shenzhen, confirming a Bloomberg report that Foxconn had asked Shenzhen employees not to return to work when the extended Lunar New Year break ends on Monday.

On Saturday, Nikkei reported that China blocked a plan by Foxconn to resume production in China from Monday amid concerns about the spread of the new coronavirus.

As such, the greenlighting of at least some work by Foxconn - so critical for Apple's production schedule - was seen by the market as a vote of confidence in Beijing's ability to contain the virus from the giant Zhengzhou facility, which employs about 350,000  of Foxconn's 1.3 million employees in China.

But is that indeed the case, or is China merely being cavaliers with the lives of hundreds of thousands of workers? The answer will emerge in the news few days, when either there is a confirmed infection among Foxconn's massive worker army, or there isn't. Or maybe even sooner, if faith in the containment of the virus among Foxconn's workers is non-existent and nobody shows up to work on Monday despite the company's reopening...