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New Delhi
CNN Business
–
Foxconn, one of Apple’s biggest suppliers, is grappling with a crisis at its biggest iPhone assembly plant in China, with social media videos showing distraught workers fleeing the shuttered facility.
The Taiwanese company is racing to contain the Covid outbreak at its campus in the central Chinese city of Zhangzhou.
The exodus is putting heavy pressure on Foxconn, ahead of the main holiday shopping season and showing how the country’s strict zero-covid policy could affect global business.
“[We] Fully understand your eagerness to return home,” Foxconn told employees over the weekend, according to a post on the official WeChat account of the Zhengzhou government.
“For workers who voluntarily stay in the company’s factory area, the port government and the company jointly ensure everyone’s… health and safety,” he added.
Analysts said the chaos in Zhengzhou could threaten Apple and Foxconn production in the coming weeks. Evan Lam, a senior research analyst at Counterpoint, estimated that 10% to 30% of iPhone 14 production could be affected in the near future if the situation does not stabilize.
The Zhengzhou campus is the world’s largest iPhone factory, accounting for up to 85% of iPhone assembly capacity, Lam estimates.
A Foxconn spokesperson told Chinese state media that the company is trying to increase production at other sites.
“At the moment, because now is the peak production season… [there is] A Foxconn spokesperson told Heenan Daily on Monday that due to the large demand for workers, the company is “also coordinating backup manufacturing capacity at other sites.”
Foxconn and Apple did not respond to requests for comment from CNN.
Shares of Foxconn, known as Hon Hai Precision Industry, fell 2.6 percent on Tuesday.
Videos of crowds leaving Zhengzhou on foot have circulated on Chinese social media in recent days. The city of more than 12 million people imposed lockdown measures early last month after dozens of cases of Covid-19 were identified.
Government media He said many Foxconn workers were among those walking to escape the city. A Foxconn manager told Media Yikai that the workers were panicking about the spread of the virus at the factory and the lack of access to official information, saying it was “an unhelpful move for some workers.”
Foxconn said it is organizing vehicles for workers who want to return home, according to a post on the official Zhengzhou government WeChat account over the weekend.
The company has quadrupled daily bonuses for factory workers this month, it reported on its official WeChat account on Tuesday.
While these disruptions will affect iPhone production in the near term, analysts say Apple’s iPhone shipments during the key holiday season may not be affected.
“I think things will go back to normal in one to two weeks,” Lam said.
“They still have a lot of alternative manufacturing sites,” Foxconn added. It has started moving production to other facilities in China, such as the southern province. “Now things are under control,” said Guangdong.
And as Beijing shows few signs of moving away from its rigid Covid policies, Apple has begun ramping up production in other countries, including India, to reduce its reliance on China.
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