The turmoil in Zhengzhou, Apple Inc.’s main manufacturing hub, is likely to result in lost production of nearly 6 million iPhone Pro units this year, according to a person familiar with assembly operations.
The situation at the plant remains fluid and the estimate of lost production could change, the person said, asking not to be named to discuss private information. Much will depend on how quickly Foxconn Technology Group, the Taiwanese company that runs the facility, can get people back on the assembly lines after violent protests over Covid restrictions. If lockdowns continue in the coming weeks, production could fall further.
The Zhengzhou campus has been hit by lockdowns and workers unrest for weeks after Foxconn and the local government struggled to contain the outbreak due to Covid infections. Thousands of workers fled chronic food shortages in October, only to be replaced by new workers who rebelled against wage and quarantine practices.
The Foxconn facility produces the vast majority of the iPhone 14 Pro and Pro Max devices, Apple’s most sought-after phones this year. These premium phones have picked up the slack for the slump in demand for the regular iPhone 14 models. Apple lowered its overall production target to about 87 million units from an earlier forecast of 90 million units, Bloomberg News reported.
Apple and Foxconn have raised their estimates of the Zhengzhou deficit over the past two weeks amid mounting disruptions, the person said, adding that they expect to make up for the 6 million units of lost production in 2023.
Analysts at Morgan Stanley earlier this month estimated the shortage of iPhone Pro models at about 6 million units this year, although that was before violence erupted in Zhengzhou last week.
Apple and Foxconn did not immediately respond to requests for comment.
The commotion in iPhone City, as the Zhengzhou complex is known, is a stark reminder of the risks to Apple from its vast supply chain in China. Foxconn struggled to quell protests – fueled largely by new hires arriving in Zhengzhou refusing onerous Covid controls – by offering a bonus to any workers who chose to return home. A weekend bonus of up to $1,800 per month was added for full-time employees who remain at the factory through December and January.
The highly visible and unusual protests in Zhengzhou exacerbated an already difficult business environment. The huge complex houses up to 200,000 workers during the peak iPhone production season. More than 20,000 new hires are said to have left after the protests.
The departure of new employees is less of a factor in production than the quarantines imposed on existing employees based on their experience and skills, said another person familiar with the assembly plant. Foxconn is actively hiring additional employees with the help of government officials. The Taiwanese company, China’s largest private employer, has years of experience hiring tens of thousands of assembly workers, especially during peak seasons.
Apple and Foxconn, also known as Hon Hai Precision Industry Co., announced earlier this month that shipments of their latest premium iPhones will be lower than previously expected due to the lockdown in China, without giving details.
Morgan Stanley analysts also worked through a worst-case scenario for Apple and Foxconn, in which the Zhengzhou factory could no longer ship iPhones for the rest of the year. That would result in a 20 percent drop in Hon Hai’s expected sales in the current quarter, analysts led by Sharon Shih wrote in the Nov. 7 research note.
https://www.independent.ie/business/technology/apple-to-lose-6-million-iphone-pros-from-tumult-at-china-plant-42178570.html Apple loses 6 million iPhone Pros in China factory riots