Apple has a huge problem with its supplier’s iPhone factory in China
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Hong Kong CNN business —
Violent worker uprisings at the world’s largest iPhone factory in central China this week have further disrupted Apple’s tight supplies, and how the country’s strict zero-coronavirus policy will hurt global tech companies. It highlights what is hurting.
Trouble began last month when Covid scare forced workers to leave a factory campus in Zhengzhou, the capital of central Henan province. Due to staff shortages, employees were offered bonuses to return.
But protests erupted this week when newly hired staff said management broke promises. Workers who clashed with guards in chemical protective suits were eventually offered cash to quit and leave.
Analysts said the problems facing Taiwanese contract manufacturer Foxconn, a top supplier to Apple, which owns the facility, will also accelerate the pace of diversification from China to countries like India.
Daniel Ives, managing director of equity research at Wedbush Securities, told CNN Business that the ongoing production shutdown at Foxconn’s sprawling campus in central China’s Zhengzhou city is an “albatross” for Apple.
“A weekly estimate of this shutdown and turmoil puts Apple in lost iPhone sales, losing about $1 billion a week. 5% could be off the table,” he said.
Ives said demand for iPhone 14 units over the Black Friday holiday was far outstripping supply and could cause a significant shortage leading up to Christmas, sparking turmoil at Foxconn that began in October. added that is a big “gut punch” for Apple. this quarter.
In a note on Friday, Ives said Black Friday store checks showed a significant shortage of iPhones across the board.
“Based on our analysis, we believe the iPhone 14 Pro shortage has gotten even worse than last week, with inventories running very low,” he wrote. “Right now, many Apple stores seem to be running out of iPhone 14 Pro. Typical he is up to 25% to 30% less than usual heading into December. ”
TF International Securities analyst Ming-Chi Kuo said: wrote on twitter More than 10% of the world’s iPhone production capacity has been affected by the situation at the Zhengzhou campus.
Apple said earlier this month that shipments of its latest iPhone lineup would be “temporarily affected” by Covid restrictions in China. An assembly facility in Zhengzhou, which normally houses about 200,000 workers, said it was “currently operating at a significantly reduced capacity” due to coronavirus restrictions.
Since mid-October, the Zhengzhou campus has been grappling with the Covid outbreak that has caused panic among employees.A video of people leaving Zhengzhou on foot went It went viral on Chinese social media in early November, forcing Foxconn to step up efforts to get its staff back.
To attract workers, the company said it quadrupled the daily bonuses for factory workers this month. A week ago, state media reported that he had successfully recruited 100,000 people to fill the vacancies.
But on Tuesday night, hundreds of workers, mostly new recruits, began to object to the terms and living conditions of the payment packages offered to them. It became more and more violent the next day.
By Wednesday evening, the crowd Back in their dormitories on Foxconn’s campus, demonstrators fell silent after offering to pay the company’s newly hired workers 10,000 yuan ($1,400), or about two months’ wages. I left the site completely and left.
In a statement sent to CNN Business on Thursday after the protests subsided, Apple said it has a team. I’m on site at the Zhengzhou facility working closely with Foxconn to ensure employee concerns are addressed.
Even before this week’s demonstration, Apple had begun manufacturing the iPhone 14 in India in an attempt to diversify its supply chain away from China.
The late-September announcement marked a major shift in the company’s strategy, coming at a time when US tech companies were looking for an alternative to China, which has been the world’s factory for decades.
The Wall Street Journal reported earlier this year that the company was considering expanding production in countries such as Vietnam and India, citing China’s draconian coronavirus measures as one reason.
Kuo said on Twitter that he believes Foxconn will speed up deployment iPhone production capacity in India is declining as a result of the Zhengzhou blockade and accompanying protests.
Foxconn’s iPhone production in India will increase by at least 150% in 2023 compared to 2022, he said, and the long-term goal is to ship 40% to 45% of such phones from India. That’s it. % now.
— Chris Isidore contributed to this report.
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November 2022
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