Apple has huge problems at supplier iPhone factories in China


A violent worker uprising at the world’s largest iPhone factory in central China this week further disrupted Apple’s tight supply and underscores how China’s strict zero-Covid policy is hurting global tech companies.

The troubles began last month when workers left the factory complex in Zhengzhou, the capital of central Henan province, out of fear of the coronavirus. Staff shortages, bonuses offered to workers to return.

But protests erupted this week when new hires said management had reneged on their promises. The workers clashed with security personnel in hazmat suits and were eventually given cash to resign and walk away.

Difficulties faced by Taiwanese contract manufacturing company Foxconn, Apple’s largest supplier, which owns the plant, will also accelerate the pace of diversification from China to countries such as India, analysts said.

The ongoing shutdown of Foxconn’s sprawling campus in the central Chinese city of Zhengzhou is a “heavy burden” for Apple, Daniel Ives, managing director of equity research at Wedbush Securities, told CNN Business.

“We estimate that each week of this shutdown and turmoil costs Apple about $1 billion in lost iPhone sales per week. About 5% of iPhone 14 sales may now be excluded due to these brutal shutdowns in China,” he said .

Security forces clash with workers during a protest outside the factory of Apple supplier Foxconn in Zhengzhou, China, on Nov. 23.

Demand for the iPhone 14 over the Black Friday holiday weekend was far higher than supply, likely leading to severe shortages ahead of Christmas, Ives said, adding that Foxconn’s shutdown starting in October was a major “blow” for Apple this quarter.

In a report Friday, Ives said Black Friday store checks showed a shortage of iPhones across the board.

“Based on our analysis, we believe iPhone 14 Pro shortages have become more severe over the last week, with very low inventories,” he wrote. “We believe that many Apple Stores are now experiencing iPhone 14 Pro shortages … or 25%-30% below normal levels going into a typical December.”

Tianfeng International Securities analyst Ming-Chi Kuo, wrote on twitter More than 10% of the world’s iPhone production capacity is affected by the Zhengzhou campus.

Earlier this month, Apple said shipments of its latest iPhone lineup would be “temporarily impacted” by China’s Covid restrictions. The company said its assembly plant in Zhengzhou, which normally accommodates about 200,000 workers, is “currently at significantly reduced capacity” due to Covid restrictions.

The Zhengzhou campus has been grappling with the coronavirus outbreak since mid-October, causing panic among staff.Video of people leaving Zhengzhou on foot goes viral It went viral on Chinese social media in early November, forcing Foxconn to take steps to get employees back to work.

To entice workers, the company said it had quadrupled daily bonuses for factory workers this month. A week ago, state media reported that 100,000 people had been successfully recruited to fill vacancies.

But on Tuesday night, hundreds of workers, mostly new hires, began protesting the terms of the payment package offered to them and their living conditions. The next day, workers clashed with heavy security forces in an increasingly violent scene.

By Wednesday night, the crowd had Protesters calmed down after Foxconn offered to pay 10,000 yuan ($1,400), or about two months’ wages, to resign and leave the factory entirely.

In a statement sent to CNN Business on Thursday after the protests subsided, Apple said it had a team Working closely with Foxconn at the Zhengzhou factory to ensure employee concerns are addressed.

Even before this week’s presentation, Apple had started producing the iPhone 14 in India as it attempted to shift its supply chain away from China.

The late September announcement marks a major change in its strategy, at a time when U.S. tech companies have been searching for decades for alternatives to China, the world’s factory.

The Wall Street Journal reported earlier this year that the company was looking to boost production in countries such as Vietnam and India, citing China’s strict Covid policies as a reason.

Guo said on Twitter that he believed Foxconn would Accelerate expansion Due to the lockdown in Zhengzhou and the resulting protests, production capacity for iPhones in India has declined.

He predicts that Foxconn India’s iPhone production will increase by at least 150% in 2023 compared to 2022, while the long-term goal is to ship 40% to 45% of such phones from India, compared with less than 4%. Now.

— Chris Isidore contributed to this report.

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