Covid 19 still grappling China

The Zhengzhou campus has been grappling with a Covid outbreak since mid-October that caused panic among its workers. Videos of people leaving Zhengzhou on foot went viral on Chinese social media in early November, forcing Foxconn to step up measures to get its staff back.

Over 20,000 workers have left the manufacturer just a day after violent protests broke out at the facility. The protests and subsequent lockdown in the city are already disturbing the manufacturer’s production timeline. The mass scale of departures is expected to further worsen the condition.

Police are hitting workers protesting over a pay dispute at the biggest factory for Apple’s iPhone, whose new model is delayed by controls imposed as China tries to contain a surge in COVID-19 cases.

As per the source, Foxconn offered higher pay to attract more workers to the Zhengzhou factory to assemble the iPhone 14, which sells starting at $799 in the United States. The protest erupted after employees who had travelled long distances to take jobs at the factory complained that the company changed the terms of their pay, according to an employee, Li Sanshan. The workers, who clashed with security officers wearing hazmat suits, were eventually offered cash to quit and leave.

This shutdown and unrest is estimated to cost Apple roughly $1 billion a week in loss in iPhone sales. Now roughly 5% of iPhone 14 sales are likely off the table due to these brutal shutdowns in China, experts say. Foxconn also came up with an apology for the unrest.

The iPhone maker claimed that a ‘technical error’ in the company’s system led to incomplete payments. The company assured the workers that they will be paid what was promised during the hiring.

Even before this week’s demonstrations, Apple had started making the iPhone 14 in India, as it sought to diversify its supply chain away from China. The announcement in late September marked a major change in its strategy and came at a time when US tech companies were looking for alternatives to China, the world’s factory for decades.

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 policy as one of the reasons. With this Foxconn would speed up the expansion of iPhone production capacity in India as a result of Zhengzhou lockdowns and resulting protests.

Going forward it is predicted that the production of iPhones by Foxconn in India will grow by at least 150% in 2023 compared to 2022, and the longer-term goal would be to ship between 40% and 45% of such phones from India, compared to less than 4% now.

S Mohini Ratna, Editor, VARINDIA