Foxconn’s main iPhone factory in China will see a further drop in November shipments after the latest wave of worker unrest this week, with thousands of employees quitting, a source familiar with the matter said on Friday.
The largest in the world apple The iPhone factory is grappling with tough COVID-19 restrictions that have sparked discontent among workers and disrupted production ahead of the Christmas and Lunar New Year holidays in January, as many workers were isolated or fled the factory.
After Wednesday’s escalation, which witnessed a clash between workers and security men, Foxconn More than 30 percent of the site’s output in November has now been affected, the source said, up from an internal estimate of as high as 30 percent when labor problems erupted in late October.
Foxconn, officially known as Hon Hai Precision Industry, declined to comment. Apple, which said Thursday it has employees at the factory, did not respond to a request for comment on Friday.
“Worker unrest at the Foxconn factory in China could weigh on Apple’s iPhone shipments for November,” said Victoria Scholar, chief investment officer at Interactive Investor, as concerns grow about Apple’s ability to deliver products for the busy holiday period.
Apple shares fell 1.9 percent in late morning trading on Friday, while the Nasdaq benchmark fell 0.3 percent.
Scholar added, “Apple continues to be seen as one of the more resilient stocks in the tech sector… However, Apple continues to refrain from providing official guidance given the macroeconomic uncertainty.”
US Best Buy said Tuesday that it expects a shortage of high-end iPhones in stores this holiday season. Analysts said iPhones in Apple stores in the United States during the Black Friday shopping season also fell short of a year earlier, and it took longer to replenish stocks, Reuters reported this week.
KGI Securities analyst Christine Wang said that if the current issue continues through December, about 10 million units of iPhone production will be lost, which translates to a 12 percent drop in iPhone shipment in the fourth quarter of 2022.
Wedbush Securities estimates that many Apple Stores now have 25 to 30 percent less iPhone 14 Pros than usual for the holiday shopping season.
In a statement released on November 7, Apple said that it expects a drop in the iPhone 14 Pro and iPhone 14 Pro Max Shipments than previously expected.
Some of the new recruits hired by Foxconn in recent weeks have claimed they were misled about compensation benefits at the factory, and others have complained about sharing dormitories with colleagues who test positive for COVID.
Foxconn on Thursday apologized for a “technical error” related to wages when hiring and later offered CNY10,000 (roughly Rs. 1,14,000) to protest new recruits who agreed to quit and leave.
The source said that more than 20,000 workers, most of whom are new employees who have not yet worked on production lines, have taken the money and left. Videos posted on Chinese social media on Friday showed crowds and long lines of workers laden with luggage lining up to wait for buses.
One wrote: “It’s time to go home.”
The plant, before its troubles began, employed more than 2,00,000 employees. It has dormitories, restaurants, basketball courts, and a soccer field across its sprawling facility of approximately 1.4 million square meters (15 million square feet).
Another Foxconn source familiar with the matter said some new employees had left campus, but did not say how many. This person said that since the people leaving had not yet been trained or started, their departure would not cause further damage to the current production.
“The accident has a big impact on our public image, but it has little impact on our (current) capacity. Our current capacity has not been affected,” the source said.
This person said, referring to other worker disruptions caused by strict COVID restrictions, including disruptions at another Apple supplier, Quanta, in May.
Foxconn shares closed down 0.5 percent, trailing the broader market which closed flat.
© Thomson Reuters 2022