Foxconn, one of Apple’s biggest suppliers, is grappling with major disruptions at its biggest iPhone assembly plant in China as anxious workers reportedly fled the locked facility, according to videos on social networks.
The Taiwanese company is racing to control a Covid outbreak at its campus in the central city of Zhengzhou in China.
The exodus puts a strain on Foxconn just before the start of the holiday shopping season and shows just how tough the country is. zero covid policy hurts international trade.
“[We] fully understand your desire to return home,” Foxconn told its employees over the weekend, according to a posting on the official Zhengzhou government website. WeChat account.
“For employees who voluntarily remain in the company’s factory area, the port government and the company will jointly ensure everyone’s health and safety,” he added.
Analysts said the chaos in Zhengzhou could jeopardize production at Apple and Foxconn in the coming weeks. Ivan Lam, senior research analyst at Counterpoint, estimated that between 10% and 30% of iPhone 14 production could be affected in the short term if the situation does not stabilize.
The Zhengzhou campus is the world’s largest iPhone factory and typically accounts for up to 85% of iPhone assembly capacity, according to Lam’s estimates.
A Foxconn spokesperson told Chinese state media that the company was trying to ramp up production at other sites.
“Currently, because now is the peak production season… [there is] high demand for workers,” a Foxconn spokesperson told the Henan Daily on Monday, adding that the company was “also coordinating backup production capacity at other sites.”
Foxconn and Apple did not respond to a CNN request for comment.
Shares of Foxconn, also known as Hon Hai Precision Industry, fell 2.6% on Tuesday.
Videos of many people leaving Zhengzhou on foot have gone viral on Chinese social media in recent days. The city, which has a population of more than 12 million, imposed sweeping lockdown measures early last month after identifying dozens of Covid-19 cases.
State media said many Foxconn workers were among those who traveled miles to escape the city. Calling it a “helpless move for some employees”, a Foxconn official told news outlet Yicai that workers are panicking over the spread of the virus at the factory and lack of access to official information.
Foxconn said it was arranging vehicles for employees wishing to return home, according to an article published by the Zhengzhou government. official WeChat account during the weekend.
The company also quadrupled daily bonuses for factory workers this month, it said in a post on its official website. WeChat account tuesday.
While these disruptions will impact iPhone production in the near term, analysts say it may not affect Apple’s iPhone shipments during the key holiday season.
“I think in one to two weeks things will be back to normal, given the current situation,” Lam said.
“They still have a lot of alternative production sites,” he said, adding that Foxconn had already begun to shift production to other facilities in China, such as the southern province of Guangdong. “Things are under control now.”
And, while Beijing shows few signs of letting go of its rigid Covid policies, Apple has started ramping up production in other countries, including Indiato reduce its dependence on China.