Foxconn’s facilities in the Chinese city of Zhengzhou have made headlines around the world in recent weeks, as Covid outbreaks and control policies have hit the world’s largest iPhone assembly line. The city recorded 1,043 new Covid-19 cases on Tuesday, according to public data revealed by the local government, and at the time of writing, much of Foxconn’s operations in the city remain under strict control. The disruption has led many to predict stock shortages and longer delivery times for iPhone models in the near future.
Foxconn is Apple’s biggest iPhone assembler, accounting for 70% of global iPhone shipments. iPhone production accounts for 45% of Foxconn’s revenue, according to analysts from Fubon Research.
The affected Foxconn plant has 200,000 workers, and more than 10% of global iPhone production capacity is currently impacted by the Zhengzhou Covid outbreak, according to Ming-Chi Kuo, an analyst for TF International Securities.
The incident could be the catalyst that pushes Apple to move more production from mainland China to other regions such as India to reduce uncertainty and supply line dependency. According to Kuo, Foxconn will speed up its expansion of production capacity in India for the iPhone in the wake of the Zhengzhou Foxconn lockdown. He predicted that India-produced iPhones will increase more than 150% yearly in 2023 and that the share of global iPhone production in the country will increase sharply, from 2%-4% to 40%-45% in the next few years.
Below, TechNode summarizes the primary moments surrounding the Zhengzhou Foxconn lockdown since late October.
Oct. 26 – Covid cases detected at Zhengzhou Foxconn
- iPhone assembler Foxconn reportedly recorded Covid-19 cases at its assembly plant in Zhengzhou, its largest facility in mainland China.
- Foxconn confirmed the cases but claimed that production was still stable in an announcement released on Oct. 26.
- The announcement also noted that “Foxconn, in compliance with local epidemic prevention policies, is providing the necessary guarantees for livelihoods, including material supplies, psychological comfort, and responsive feedback.”
Oct. 28 – Closed-loop policy enacted as workers flee
- The Foxconn facility in Zhengzhou affected by the Covid outbreak began using a “closed-loop” system, only allowing workers to move between factories and dormitories and not allowing them to leave the site, according to an announcement on Oct. 28.
- Short videos purporting to show Foxconn workers bypassing security and Covid checks to climb out of the Foxconn facility went viral on Chinese social media.
Oct. 30 – Local government responds; analyst projects decline in iPhone production
- The Zhengzhou government released an announcement saying that the pandemic in the Foxconn facility was controllable as there were no cases with severe symptoms.
- The local government also stated that they would offer assistance with transporting workers who wished to return home.
- “More than 10% of global iPhone production capacity is currently affected as Foxconn’s Zhengzhou iPhone plants suddenly entered closed-loop production without warning,” wrote Ming-Chi Kuo, an analyst for TF International Securities.
- He added that the accident would have a limited impact on iPhone shipments for the fourth quarter of 2022, as the facility’s production capacity could gradually recover in the coming weeks.
Nov. 1 – Foxconn increases salaries to steady production
- Zhengzhou Foxconn announced that they would raise daily salaries from RMB 100 to RMB 400 (from $13.8 to $55.21) in November.
- The firm also adjusted its attendance award scheme from RMB 1,500 for 13 accumulated working days to RMB 5,000 for 25 accumulated working days.
Nov. 3 – Zhengzhou government forms unit to help Foxconn workers
- The Zhengzhou municipal government held a press conference on Nov. 3, saying they had formed a unit to enter the affected Foxconn facility to assist with Covid prevention work.
- A senior official from the local government stated at the conference that Foxconn was still operating normally.
Nov. 6 – Apple warns of iPhone production decline
- Apple released a statement on Nov. 6, warning that its iPhone 14 Pro and Pro Max would see a production drop due to the Covid restrictions in Zhengzhou.
- The statement noted that the facility was “currently operating at significantly reduced capacity.”
- Apple projected ongoing strong demand for the two Pro models, which led the company to warn that there would be longer delivery times for consumers.
Nov. 7 – Foxconn hires hourly paid workers
- In an attempt to revive production, Foxconn started to hire hourly paid workers on Nov. 7, with an hourly salary of RMB 30.
- The firm also encouraged former employees to come back with an extra subsidy of RMB 500.
- A source from Foxconn told Caixin that the Zhengzhou outbreak is expected to be controlled after this week, and Foxconn is preparing to return to full production later this month.