iPhone assembly plants in China belonging to Foxconn will not return to normal production volumes for at least another week due to the novel coronavirus outbreak, multiple media reports have reported, with some factories remaining closed and delayed returns expected for significant parts of its labor force.
Why it matters: Foxconn, also known as Hon Hai Precision Industry Co., is China’s largest private sector employer and the world’s biggest iPhone assembler. Delays in Foxconn’s production, a key manufacturing contractor for Huawei, Amazon, Google, and many others, are likely to affect supply chains for several major electronics brands.
- The coronavirus outbreak, first reported in Wuhan, the capital of central Hubei province, has infected more than 40,000 worldwide and killed 909, and brought China to a standstill.
Details: Local authorities in Shenzhen have ordered Foxconn to keep its factories closed over the next week due to “violation of epidemic prevention and control” which could result in the death penalty, Nikkei Asian Review reported on Saturday, citing anonymous sources familiar with the matter.
- The local government of Longhua in Shenzhen, where Foxconn’s largest factory is located, denied the report in a WeChat post (in Chinese) on Sunday. It said that on-site inspections to determine whether Foxconn plants are adequately equipped to prevent the virus from spreading were still ongoing.
- The Longhua government added that the company had applied for resumption of work on Feb. 6.
- But labor shortages could continue to crimp Foxconn’s operations even after the plants re-open. As the number of infections rise, travel is limited and people across China remain in quarantine.
- Apple analyst Ming-Chi Kuo said Foxconn’s Shenzhen factories will not open until at least next week, and that 40% to 60% of the workforce will resume normal operations.
- In the northeastern city of Zhengzhou, about 10% of Foxconn’s factory workers or 16,000 people returned to work today, Reuters reported Monday quoting a person with direct knowledge of the matter.
- About 30% to 50% of the workers in the Zhengzhou plant will return to work next week, Ming-Chi Kuo estimated.
- Foxconn responded to reports saying they are working closely with local governments to fulfill requirements for the resumption of work. Factories will re-open in a piecemeal fashion, according to a statement the company sent to TechNode.
Context: Southern Guangdong province, where Shenzhen is located, has reported the second-highest number of coronavirus infections after Hubei. Shenzhen counts 368 confirmed cases, compared with 337 in Beijing and 295 in Shanghai, according to official data.
- Foxconn’s labor and safety practices have been criticized in the past. In 2011, an explosion in a Chengdu factory working on Apple, Microsoft, and Samsung contracts led to three deaths and 15 injuries.
- Up to eight factory workers sleep in the same room in Foxconn’s dormitories, according to a 2017 investigation by the Guardian.
- Apple has closed all its retail stores in China until Feb. 13 or 14, Bloomberg reported on Friday.
- In June, Foxconn announced it will be improving its production capacity outside mainland China to mitigate risks arising from the trade war, as well as rising labor costs.
- South Korean manufacturers Samsung and LG were set to resume operations today, Korean media reported.