The worker’s revolt at Foxconn further weighs on Apple’s production shortages and underscores how the draconian “zero-COVID” measures undermine technology companies worldwide.
According to a South China Morning Post report on December 3, Foxconn, Apple’s biggest supplier, recently poured about $142 million (1 billion yuan) in fresh capital into its northern China plants.
The move comes as its Zhengzhou facility, the world’s largest iPhone factory, stumbles to resume full production capacity to meet surging holiday orders.
Foxconn is facing a significant labor shortage after its workers fled the site in droves at the end of October amid fears of a stringent “zero-COVID” policy measures following an outbreak.
SCMP, citing a stock exchange filing, noted that the new investment was made for its unit in Taiyuan, the capital of Shanxi province.
Apple views Shanxi and six other provinces, including Henan and Jiangsu, as Foxconn’s major manufacturing locations for Apple products in China.
The Taiyuan facility, which Foxconn calls a “long-term investment,” was set up in the early 2000s and primarily manufactures electronics parts, mobile communication systems, smartphones, and digital cameras.
Data from Counter Point Research shows that the Zhengzhou 郑州 factory compound manufactures 80% and 85% of iPhone 14 and iPhone 14 Pro, respectively.
But due to the recent new hires’ protests over unpaid work bonuses, coupled with shrinking consumer demand for entry-level iPhones, investment bank UBS cut its previous prediction of iPhone 14 output by 16 million to 76 million units for the year’s second half.
Ives said, “Every week of this shutdown and unrest we estimate is costing Apple roughly $1 billion a week in lost iPhone sales. Now roughly 5% of iPhone 14 sales are likely off the table due to these brutal shutdowns in China.”
He further explained that the production shutdown in Zhengzhou that started in October has significantly impacted Apple’s sales this quarter.
Over Black Friday, Apple iPhone 14 supplies couldn’t meet customer demand. This would likely lead to severe product shortages for the upcoming Christmas shopping season.
In a note on November 25, Ives wrote, “Based on our analysis, we believe iPhone 14 Pro shortages have gotten much worse over the last week with very low inventories. We believe many Apple Stores now have iPhone 14 Pro shortages … of up to 25%-30% below normal heading into a typical December.”
Under the pressure of strained supplies and workers’ revolt at the Zhengzhou campus, the major Apple supplier is speeding up the relocation of iPhone manufacturing outside China.
And in the long run, Kuo projected Foxconn in India could supply the world with 40% to 45% of iPhones, far exceeding its current shipment of below 4%.
As reported by SCMP, Foxconn has recently injected about $59 million in investments into a subsidiary in the Czech Republic for manufacturing screens, smartphones, and cloud servers, as well as building design, research, and development centers.
In August, Apple spent a total of $300 million to build a new factory in Vietnam.