An iPhone Shortage Is Imminent
A Covid outbreak in Zhengzhou, China at a Foxconn facility, one of Apple’s largest suppliers, has meant slowdown in manufacturing and could mean an iPhone shortage.
Foxconn is experiencing major disruptions at its biggest Chinese iPhone factory as it races to control a Covid outbreak. The company, which is one of Apple’s largest suppliers, saw frustrated workers flee the locked-down facility in the city of Zhengzhou last week. The seven-day quarantine imposed by authorities could also affect the production and shipment of the highly coveted smart devices.
The lockdown and the exodus are putting tremendous strain on the iPhone maker ahead of the holiday shopping season begins. The crisis also highlights how China’s strict Zero Covid policy is harming international business. “We fully understand your eagerness to go back home,” Foxconn told its employees via CNN Business. The message added that the health and safety of employees who voluntarily stay in the factory is a top priority for government officials and Foxconn.
However, experts say the chaos could jeopardize Apple and Foxconn’s output in the coming weeks. Addressing the situation, Senior Research Analyst at Counterpoint Ivan Lam said the Zhengzhou campus accounts for almost 85% of Apple’s assembly capacity. But due to the current situation at the assembly plant, the production of iPhone 14 devices could be affected by between 10% and 30%. As a result, Foxconn is trying to boost production at other sites.
Speaking about the imminent iPhone shortage, a Foxconn spokesperson told Henan Daily that since there is a large demand for workers before the holiday shopping season the company is coordinating backup production capacity at other sites. Following the news shares of Foxconn, which is also known as the Hon Hai Precision Industry, fell by 2.6%.
Meanwhile, videos of people feeling the Zhengzhou iPhone factory have gone viral on social media in recent days. The city, which has a population of more than 12 million, imposed sweeping lockdown measures last month after identifying dozens of Covid-19 cases. Chinese state media said Foxconn workers are among those walking miles to escape the city.
Calling it a helpless move for some employees, a Foxconn manager told the Yicai media outlet that workers are worried about the virus spreading within the iPhone factory. And the situation has been made worse by the lack of access to official information. According to a post on the Zhengzhou government’s official WeChat account, the company is now organizing vehicles for employees who want to go home.
Due to the ongoing nature of the situation, Foxconn has also quadrupled daily bonuses for workers at the plant this month. While these disruptions will impact the short-term production of iPhones, they may not dent Apple’s shipments during the key holiday season. “I think in one to two weeks, things will get back to normal, given the current status,” Lam told CNN Business.
His positive outlook comes because Apple has a lot of alternative production sites. And Foxconn has already started moving production to other facilities in China. These are located in the southern province of Guangdong. And, as Beijing shows few signs of moving away from its rigid pandemic policies, the iPhone maker is boosting production in countries like India to reduce its dependence on China.
