After months of production shutdowns, Foxconn, Apple’s (NASDAQ: AAPL) manufacturing partner, has restarted production at its Chinese factories.
The Taiwanese-owned company is the manufacturer of the Apple iPhone and iPad. It also produces devices for Microsoft, Sony, and Dell.
Foxconn held an investor call recently, announcing a 72% decline in operating profit when comparing data to last year. The company said that lockdowns in China and rising global unemployment have “impacted consumer demand significantly.” The company’s smartphone and consumer device manufacturing division has been disrupted by the Coronavirus Pandemic.
When asked about guidance for the coming quarters, Chairman Liu Young-Way said that “It’s still unclear for us what is going to happen.”
What The News Means for American Businesses
Investors in companies like Apple, Microsoft, Dell, and Sony will be happy to learn that one of the largest consumer electronics manufacturers is back online.
China is starting to ease lockdown restrictions. As the world’s largest manufacturing nation, increased production shows that there’s an eventual upside for countries currently battling the Coronavirus.
For Apple investors, it is major news. The company is likely to announce a 5G capable iPhone towards the end of this year, or at the beginning of 2021. With its manufacturing partner at full capacity, it should be able to avoid any production shortfalls.
5G technology allows for faster wireless internet speeds and lower latency. A 5G iPhone is likely to be a major revenue driver when it is released.
Is This a Sign of Market Growth?
Manufacturing is largely linked to the consumer market. Consumer spending is responsible for two-thirds of U.S. Gross Domestic Product.
This news will give some confidence to Apple investors as well as those with holdings in similar tech companies. But, the wider economy, especially in the U.S., will need to show signs of sustained recovery before the stock market picks up long term traction.
In the meantime, Apple is up 4.79% in the year to date and 8.81% over the last month. There’s a slight price upside predicted on the stock and a 1.07% dividend yield for investors. It remains a compelling stock pick, and with its manufacturing capabilities restored, it’s a solid tech investment for the long term.
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