iPhone manufacturer Foxconn is relocating production

Apple's main iPhone assembly plant Foxconn is preparing to shift production to other parts of China after crowds of workers fled the main plant to escape a worsening Covid-19 outbreak.

City officials on Monday used buses to evict workers from the Zhengzhou plant, where workers say the company has failed to provide adequate food and a safe work environment during the outbreak that is testing Apple's supply chains Has.

According to analysts, the factory complex accounts for about 60 percent of Foxconn's iPhone assembly capacity.

"We are in the peak production season right now, so we need a lot of assembly line workers...our company is coordinating production capacity at other locations," a Foxconn plant spokesman told Chinese state media.

Shares in Hon Hai Precision Industry, Foxconn's Taiwan-listed company, fell 1.4 percent on Monday. "In view of the current pandemic situation, it is a protracted struggle to ensure the safety of the more than 200,000 employees," Foxconn said in a stock exchange release on Sunday evening.

Apple has located most of its supply chain in China, exposing the US tech giant to Beijing's rigid zero-Covid strategy.

Ming-chi Kuo, an analyst at TF International Securities, estimates that the situation in Zhengzhou affects "more than 10 percent of the world's iPhone production capacity."

However, Kuo said the Covid outbreak is not yet impacting Apple's current-quarter iPhone shipment forecasts. "Foxconn's manufacturing capabilities are expected to gradually recover over the next few weeks and the impact on Q4 22 iPhone shipments will be limited," he said.

Local Chinese authorities tasked Foxconn on Sunday with helping workers return home and improving conditions at the factory after photos and videos of hundreds of workers walking off the premises went viral on social media .

Two Foxconn workers who are self-quarantining in buildings around the factory complex said their assembly lines were understaffed Monday. "Nobody at my place of work said they were working," said one of the Foxconn employees, who asked not to be identified.

A third employee said he was considering reporting in for work Monday night. "The pandemic scares me... but I have to make money," he said, adding that assembly lines were already overwhelmed by last week's labor shortage.

Morgan Stanley analysts said they would keep an eye on the situation in the fourth quarter, which is "the peak season for iPhone shipments."

"Zhengzhou is one of Foxconn's key manufacturing bases, especially for iPhone assembly," a report said.

Authorities have cordoned off large parts of Zhengzhou to contain the city's recent Covid outbreak. The city of more than 10 million people reported 40 new Covid cases on Monday.

Foxconn and Apple did not immediately respond to requests for comment.