iPhone November Shipments See Continued Decline at Foxconn’s China Plant

Foxconn’s iPhone factory in China will once again reduce shipments in November after the latest labor unrest this week, a source with direct knowledge of the matter said on Friday, as thousands of workers quit.

The world’s largest Apple iPhone factory has been facing strict COVID-19 restrictions that have fueled discontent among workers and disrupted production before Christmas and the January New Year holiday, as many workers were placed in isolation or fled the plant.

After Wednesday’s hike that saw workers clash with security forces, Foxconn could now see more than 30 percent of the facility’s production in November affected, down from an internal estimate of up to 30 percent when labor problems erupted in late October, the source said.

The factory only makes premium iPhone models, including the iPhone 14 Pro, and the source said it is unlikely to resume full production by the end of this month.

Foxconn, known as Hon Hai Precision Industry, declined to comment. Apple, which said Thursday it has workers at the factory, did not respond to a request for comment Friday.

“Labor unrest at Foxconn’s China plant could weigh on Apple’s November shipments,” said Victoria Scholar, head of investments at Interactive Investor, as concerns grow about Apple’s ability to deliver products during the busy holiday season.

Apple shares were down 1.9 percent in morning trading Friday, while the benchmark Nasdaq index was down 0.3 percent.

“Apple is still considered one of the strongest stocks in the technology sector… However, Apple continues to hold back from providing official guidance given the macroeconomic uncertainty,” said Scholar.

US Best Buy said on Tuesday it expects high-end iPhones to be in short supply this holiday season. Analysts said iPhones in Apple stores in the United States during Black Friday shopping were also lower than a year ago, and it was taking longer to replenish stocks, Reuters reported this week.

Low Shipping

KGI Securities analyst Christine Wang said that if the current issue continues in December, about 10 million units of iPhone production will be lost, which means that iPhone shipments will drop by 12 percent in the last quarter of 2022.

Wedbush Securities estimates that most Apple stores now have 25 to 30 percent fewer iPhone 14 Pros than usual given the holiday shopping season.

In a statement on November 7, Apple said it expects iPhone 14 Pro and iPhone 14 Pro Max shipments to be lower than previously expected.

Some new hires hired in recent weeks by Foxconn say they were misled about compensation benefits at the factory, while others complained about sharing dormitories with co-workers who tested positive for COVID.

Foxconn on Thursday apologized for a “technical error” related to pay during the hiring process and later offered CNY 10,000 (about Rs. 1,14,000) to the protesting new employees who agreed to resign and walk away.

The source said that more than 20,000 workers, most of whom are young people who have not yet worked on the production lines, took the money and left. Videos posted on Chinese social media on Friday showed crowds and long lines of luggage workers queuing for buses.

“Time to go home,” someone said.

This facility, before the problems started, employed more than 2,00,000 workers. It has accommodations, restaurants, basketball courts and a football field throughout its nearly 15 million-square-foot area.

Another Foxconn source familiar with the matter said that some new hires have left the agency but did not elaborate on how many. This person said that because the people leaving were not yet trained and had not yet started working, their departure would not cause any further damage to existing production.

“This incident has a big impact on our position in society but it is very little on our strength (at the moment). Our strength is currently unaffected,” said the source.

“There’s only so much that companies can do to stop the pandemic… It’s been a problem for a while. This is a problem that everyone is dealing with,” the person said, pointing to other labor unrest caused by stricter COVID restrictions, including occasional outbreaks. Apple supplier, Quanta, in May.

Shares of Foxconn closed down 0.5 percent, leaving the broader market, depleted.

© Thomson Reuters 2022

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