Foxconn’s flagship iPhone plant in China is expected to further cut shipments in November after the latest outbreak of worker unrest this week, a source with direct knowledge of the matter said Friday as thousands of employees are laid off.
The world’s largest Apple iPhone factory is struggling with severe COVID-19 restrictions that have angered workers and disrupted production ahead of Christmas and the January Lunar New Year as many workers have either been isolated or left the factory.
After Wednesday’s escalation in which workers clashed with security personnel, Foxconn could now face more than 30 percent of November production at the site being affected, up from an internal estimate of up to 30 percent when workforce issues arose at the site, the source said. end of October.
The factory is the only one producing premium iPhone models, including the iPhone 14 Pro, and a source said that production is unlikely to resume at full capacity by the end of this month.
Foxconn, officially known as Hon Hai Precision Industry, declined to comment. Apple, which said on Thursday it had employees at the plant, did not respond to a request for comment on Friday.
“Worker unrest at Foxconn’s China plant could impact November shipments of Apple iPhones,” said Victoria Shkollar, head of investment at Interactive Investor, as concerns grow over Apple’s ability to ship during the busy holiday period.
Shares of Apple fell 1.9 percent in late morning trading on Friday, while the underlying Nasdaq index was down 0.3 percent.
“Apple continues to be regarded as one of the most resilient companies in the technology sector… However, Apple continues to refrain from providing official guidance due to macroeconomic uncertainty,” Scolar added.
On Tuesday, US Best Buy said it expects a shortage of high-end iPhones in stores this holiday season. Analysts say the number of iPhones in U.S. Apple stores during the Black Friday sales season also fell year-over-year, and restocking took longer, Reuters reported this week.
KGI Securities analyst Christine Wang said that if the current problem continues until December, about 10 million units of iPhone production will be lost, which means a 12 percent decline in iPhone shipments in the last quarter of 2022.
Many Apple stores now have 25-30% fewer iPhone 14 Pros than usual ahead of the holiday shopping season, Wedbush Securities estimates.
In a November 7 statement, Apple said it expects lower shipments of the iPhone 14 Pro and iPhone 14 Pro Max than previously thought.
Some recruits hired in recent weeks by Foxconn have claimed they were misled about factory compensation payments, while others have complained about sharing dorms with colleagues who tested positive for COVID.
On Thursday, Foxconn apologized for a “technical error” related to pay while hiring, and later offered 10,000 yuan (nearly Rs. 1,14,000) to protesting recruits who agreed to resign and leave.
The source said more than 20,000 workers, mostly new hires not yet on the production lines, took the money and left. Videos posted to Chinese social media on Friday show crowds and long lines of workers with luggage queuing for buses.
“Time to go home,” wrote one user.
The plant had more than 2,000,000 employees before its problems began. The approximately 1.4 million square meters (15 million square feet) site contains dormitories, restaurants, basketball courts, and a soccer field.
Another Foxconn source familiar with the matter said some new hires have left campus, but did not specify how many. This person said that since the people leaving had not yet been trained and started working, their departure would not further harm the current production.
“The incident had a big impact on our public image, but little impact on our (current) opportunities. This did not affect our current capabilities, ”the source said.
“Corporations cannot do that much to prevent a pandemic… This has been a problem for some time. It’s a problem that everyone is facing,” the person said, pointing to other workers’ unrest caused by tight COVID restrictions, including upheavals at another Apple supplier, Quanta, in May.
Foxconn shares closed down 0.5 percent, trailing the broader market, which closed unchanged.
© Thomson Reuters 2022