Why China’s efforts to help world’s largest iPhone factory descended into violent protests, further disrupting Apple’s supply chain

The latest disruption shows how efforts by authorities in central Henan province to help Foxconn resume full production in Zhengzhou have backfired
That situation may cause major iPhone 14 shortages well into this Christmas season, analysts say

Foxconn

Ben Jiangin Beijing,Iris Dengin ShenzhenandTracy Quin Shanghai

Published: 9:30pm, 24 Nov 2022

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Protests over Covid-19 measures and employee benefits that descended into violent clashes between hundreds of workers and security forces at the world’s largest iPhone factory in Zhengzhou, capital of central Henan province, are expected to further derail manufacturing and global shipment schedules of Apple’s flagship product.

That turn of events also showed how the efforts by Henan authorities to help resume full production at the Foxconn Technology Group-operated facility have backfired, which could accelerate the pace of shifting more electronics production outside mainland China to countries like Vietnam and India.

Videos that circulated online on Tuesday and Wednesday, which were verified by several former Foxconn employees in Zhengzhou, showed fights breaking out between workers and security forces at the factory. These videos also showed angry workers kicking down barriers and dismantling polymerase chain reaction testing kiosks.

A major complaint by workers, some of whom agreed to speak with the South China Morning Post, is that new recruits were forced to share dormitories with known Covid-19 patients inside the Zhengzhou compound. Foxconn denied this allegation in its statement issued on Wednesday.

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Violence erupts at world’s largest iPhone factory over benefits and Covid-19 controls

Local authorities had earlier sent in thousands of personnel to help Foxconn enforce quarantine, ensuring workers do not leave the area as part of a “closed-loop” production system that keeps all personnel living and working inside the campus. At full production capacity, Foxconn’s Zhengzhou manufacturing complex can accommodate up to 300,000 workers.

Apart from the crammed dormitories and rigid quarantine enforcement, workers also complained about employee benefits. Two ex-workers who spoke on condition of anonymity said promised allowances were cut. While Foxconn confirmed on Wednesday that workers protested over their work allowance, it said this payment “has always been fulfilled based on contractual obligation”.

The latest disruption at the Foxconn site reflects how initiatives taken by Chinese government authorities to support this major facility in Apple’s manufacturing supply chain were miscalculated and have spectacularly boomeranged.

A provincewide campaign by local authorities in Henan recently saw People’s Liberation Army veterans being actively recruited to work at the Foxconn facility. Authorities also encouraged cadres in the cities of Kaifeng and Jiyuan in Henan to “form teams” and join Foxconn’s assembly lines in Zhengzhou for at least a month.

Workers at Foxconn Technology Group’s manufacturing complex in Zhengzhou, capital of central Henan province, are seen kicking down barriers in protest, as they clash with security personnel and local police on November 23, 2022. Photo: Agence France-Presse.

That campaign was carried out soon after an exodus of tens of thousands of workers from Foxconn’s Covid-19-hit Zhengzhou compound started at the end of October.

The exodus prompted Apple to warn about “lower iPhone 14 Pro and iPhone 14 Pro Max shipments” because Foxconn’s Zhengzhou factory was “operating at significantly reduced capacity”.

While Foxconn has offered more cash perks for assembly line workers to stay longer in Zhengzhou, chaos at the company has disappointed recruits.

A new recruit surnamed Zhang, who is from a neighbouring province, said he had to share a room at a Foxconn dormitory in Yukang New Town with seven other new hires. “Everyone in the dormitory wants to quit,” he said.

iPhone factory walkout shows China’s Covid narrative still strikes fear

Before he was bused into the dormitory, Zhang had to quarantine in a hotel room for three days after registering with a labour agency to work for Foxconn.

“The factory is in chaos,” Zhang said. “I heard the [Covid-19] positive cases are still working inside the factory.” He added that some people who had already quarantined for three days still cannot get into the factory to start work.

His account echoed those shared on social media by another new Foxconn hire, who goes by the pseudonym “Xiaodong” on Douyin, the Chinese version of TikTok. While Foxconn paid each recruit 400 yuan (US$55.86) a day as quarantine allowance, Xiaodong said they still feared the Covid-19 situation in Zhengzhou.

Foxconn offers US$1,400 to new hires to leave Zhengzhou iPhone factory

The Taiwanese company, formally known as Hon Hai Precision Industry, said in a statement on Thursday that there was a “technical error” during the onboarding process. It also guaranteed that “the actual pay is the same as agreed and [advertised in the] official recruitment posters”. It did not elaborate.

In a desperate move to end the violent protests, Foxconn also pledged to pay each newly-hired worker 10,000 yuan to immediately leave the Zhengzhou campus.

That followed an announcement by Zhengzhou, with a population of 12 million, of another five-day lockdown from Friday after the city reported 153 new infections and 521 asymptotic cases on Wednesday.

Apple extends wait time in China for popular iPhone 14 models up to January

“The zero-Covid shutdowns at Foxconn [in mainland China] have been a major gut punch to Apple this quarter and we believe have taken roughly 5 per cent of iPhone 14 units out of the supply chain,” Wedbush Securities analysts Daniel Ives and John Katsingris wrote in a research note published on Wednesday.

They suggested that the disruption in Apple’s China manufacturing supply chain could cause major iPhone 14 shortages well into this Christmas season, as demand for the device’s popular models has outweighed supply.

Apple did not immediately respond to a request for comment on Thursday.