Industrial dispute hits iPhones
Foxconn’s main iPhone plant in China is set to delay shipments of Apple products further, by the latest round of worker unrest to hit the factory in Zhengzhou.
The Taiwanese electronics contractor – the world’s largest company doing such work for brands like Apple – could now see more than 30% of the site’s November and December production affected, including premium iPhone models, including the iPhone 14 Pro.
Reports said the plant is unlikely to resume full production by the end of this month, amid the labour dispute centring on a lack of bonus payments and China’s strict Covid laws that have meant plenty of staff being denied entry to work.
Timing of the essence
The disrupted production comes at terrible time for sales globally, ahead of Christmas and January’s Lunar New Year holiday, as many workers were either placed into Covid isolation or fled the plant.
Apple’s share price fell nearly 4%, and Foxconn’s 2%, despite the plant offering hiring bonuses and competitive pay rates.
If the problems persist through all of December, it will cost Foxconn and Apple the output of around 10 million iPhones, equal to cutting iPhone shipments 12% in the fourth quarter, analysts said.
Foxconn’s managers said the company was caught in a difficult position, having to speed up shipments during Apple’s most important holiday season while following local government’s strict Covid guidelines.
“It was the busiest time of the year,” said a senior Foxconn official, adding that an October outbreak on the Zhengzhou campus caught the company off guard and triggered “a mess”.
Symptoms of dissent
The rare scenes of open revolt in China mark an escalation of unrest at the massive factory in the city of Zhengzhou, that has been mirrored in other cities in frustration with the country’s draconian Covid rules.
With China refusing to import foreign vaccines and domestic ones having less impact in fighting infections, civil disturbances could become more widespread.
Our take
Both China’s and Foxconn’s handling of the Apple facility tensions have been seen wanting, and with such a severe blow to production of a popular product this close to festive seasons worldwide could mean Apple’s rivals benefit.
A wider implication is whether the unrest becomes a touchpaper for nationwide rebellion, that could lead to police or even military intervention – which would obviously have severe knock-on effects to the Chinese economy.
And when Chinese manufacturing takes a hit, the rest of the world reels, so the investor who sees the omens coming – and what the alternatives might be – would be in good standing.