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Apple has a Huge Problem With an iPhone Factory in China

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Apple has a Huge Problem With an iPhone Factory in China

(CTN News) – The world’s biggest iPhone manufacturer in central China had a violent workers’ uprising last week, significantly disrupting Apple’s already constrained supplies and illuminating how the nation’s strict zero-Covid policy is harming international technology companies.

Foxconn Zhengzhou plant’s Nov shipments to fall further

Last month, workers fled the manufacturing campus in Zhengzhou, the capital of the central province of Henan, due to concerns about Covid, which marked the beginning of the problems.

As a result of the personnel shortage, incentives were provided to employees. However, this week there were demonstrations because the freshly recruited personnel felt the management had broken their word.

The employees were ultimately given money to resign and go after tussling with security guards wearing biohazard suits.

According to analysts, the difficulties faced by Foxconn, a major Apple supplier and the factory owner, will hasten the diversification process away from China and toward nations like India.

According to Daniel Ives, managing director of equities analysis at Wedbush Securities, the continuous production slowdown at Foxconn’s huge facility in the central Chinese city of Zhengzhou is an “albatross” for Apple.

Apple iPhone 14 production has been slowed in China

We estimate that Apple loses $1 billion in iPhone sales per week due to the closure and turmoil. Due to these severe shutdowns in China, he claimed that around 5% of iPhone 14 sales are now most certainly out of the question.

Ives noted that the Black Friday holiday weekend saw much higher demand for iPhone 14 units than available, which could result in significant shortages leading up to Christmas.

 

He also noted that the Foxconn production problems began in October and dealt a significant “gut punch” to Apple this quarter. Ives said in a message on Friday that Black Friday retail inspections revealed significant iPhone shortages everywhere.

According to our data, we think the shortages of the iPhone 14 Pro have worsened over the last week due to very low supplies, he stated.

As we approach a typical December, we estimate that many Apple Stores now have shortages of the iPhone 14 Pro that range from 25% to 30% below average.

According to Ming-Chi Kuo, an analyst at TF International Securities, the scenario at the Zhengzhou campus has a negative impact on more than 10% of the world’s ability to produce iPhones.

Covid Outbreak in China

Apple said earlier this month that Covid limitations in China would “temporarily impair” the distribution of its most recent iPhone series. It said that because of Covid limitations, its Zhengzhou assembly factory, which typically employs around 200,000 people, was “now working at considerably reduced capacity.”

Since mid-October, the Zhengzhou campus has been dealing with a Covid epidemic that has alarmed its staff.

Early in November, videos of individuals fleeing Zhengzhou on foot became widespread on Chinese social media, causing Foxconn to take more aggressive tactics to get its employees back.

The corporation said it had increased daily employee incentives for the facility this month to attract staff. According to official media from a week earlier, 100,000 candidates have been hired to fill the open posts.

But on Tuesday night, hundreds of workers—mostly recent hires—started to demonstrate against the conditions of the compensation packages being presented to them as well as against their living circumstances. The following day, when workers and several security personnel battled, the scenes became more and more violent.

By Wednesday night, the crowds had subsided, and protestors on the Foxconn campus had returned to their dorms after the business offered to pay the recently hired employees 10,000 yuan ($1,400), or nearly two months’ worth of earnings, to resign and leave the location completely.

Opportunity for India

After the demonstrations ended on Thursday, Apple told CNN Business in a statement that it had a team in Zhengzhou working closely with Foxconn to ensure workers’ issues were taken care of.

Apple began producing the iPhone 14 in India even before last week’s protests to diversify its supply chain away from China.

The declaration in late September signalled a significant shift in its approach and came as US IT firms were exploring alternatives to China, which had served as the world’s factory for decades.

Earlier this year, The Wall Street Journal reported that the corporation was aiming to increase manufacturing in nations like Vietnam and India, citing one of the reasons as China’s tight Covid regulation.

On Twitter, Kuo expressed his belief that Foxconn will hasten the development of the iPhone manufacturing capacity in India due to the lockdowns in Zhengzhou and the ensuing demonstrations.

He anticipated that Foxconn’s manufacturing of iPhones in India will increase by at least 150% in 2023 compared to 2022 and that the long-term objective would be to export between 40 and 45 percent of such phones from India, up from less than 4 percent at the moment.

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