TAIPEI, Nov 25 (Reuters) – Foxconn’s (2317.TW) flagship iPhone factory in China will further reduce November shipments after the latest round of worker unrest this week, a source with direct knowledge of the situation said on Friday. Because thousands of employees resigned.
The world’s largest Apple (AAPL.O) iPhone factory has been grappling with strict COVID-19 restrictions that fueled worker discontent and disrupted production ahead of the Christmas and Chinese New Year holidays in January as Many workers were either quarantined or fled the plant.
Following Wednesday’s clashes between workers and security guards, more than 30 percent of Foxconn’s November production could be affected, the sources said, up from an internal estimate of as much as 30 percent hit when labor problems erupted in late October.
The factory is the only one producing high-end iPhone models, including the iPhone 14 Pro, and sources say it is unlikely to resume full production by the end of the month.
Foxconn, formally known as Hon Hai Precision Industry Co., declined to comment. Apple said on Thursday that it has employees at the factory and did not respond to a request for comment on Friday.
Victoria Scholar, investment director at Interactive Investor, said: “Worker unrest at Foxconn’s China factory could affect Apple’s iPhone shipments in November amid growing concerns about Apple’s ability to deliver products during the busy holiday season.
Shares of Apple were down 1.9% in late Friday morning trading, while the benchmark Nasdaq was down 0.3%.
“Apple is still viewed as one of the more resilient stocks in the tech sector…However, Apple continues to delay providing official guidance given macroeconomic uncertainty,” Scholar added.
Best Buy Inc (BBY.N) said on Tuesday it expects high-end iPhones to be in short supply at stores this holiday season. iPhone sales at U.S. Apple stores during the Black Friday shopping season also fell from a year earlier and took longer to restock, analysts said, Reuters reported this week.
lower shipments
KGI Securities analyst Christine Wang said that if the current problems continue until December, about 10 million iPhone production will be lost, which means that iPhone shipments will drop by 12% in the final quarter of 2022.
[1/2] The logo of Foxconn is seen outside the company building in Taipei, Taiwan, November 10, 2022. Reuters/Ann Wang
Wedbush Securities estimates that many Apple stores have 25% to 30% fewer iPhone 14 Pros than usual heading into the holiday shopping season.
In a statement on November 7, Apple said it expected to ship fewer iPhone 14 Pro and iPhone 14 Pro Max than previously expected.
Some of Foxconn’s new hires in recent weeks claim they were misled about pay and benefits at the factory, while others have complained about sharing dorms with colleagues who tested positive for COVID.
Foxconn apologized on Thursday for a pay-related “technical error” in its recruitment and later offered 10,000 yuan ($1,400) to protest new employees who agreed to resign and leave.
More than 20,000 workers, mostly new hires not yet on the production line, took their money and left, sources said. Video posted on Chinese social media on Friday showed crowds and workers with luggage waiting in long lines for the bus.
“It’s time to go home,” one netizen posted.
Before the troubles began, the plant employed more than 200,000 people. In its sprawling facility of approximately 1.4 million square meters (15 million square feet), there are dormitories, restaurants, basketball courts and a soccer field.
Another Foxconn source familiar with the matter said some of the new employees had left the campus, without elaborating on how many. Since the departing staff have not yet received training or work, there will be no further harm to current production, the person said.
“The incident has had a big impact on our public image, but not much on our (current) production capacity. Our current production capacity has not been affected,” the source said.
“There’s only so much businesses can do in terms of preventing a pandemic … it’s always been a problem. It’s a problem for everyone,” the person said, referring to other worker unrest sparked by strict COVID restrictions, Including another factory upheaval. Apple supplier Quanta (2382.TW), May.
Foxconn shares closed down 0.5 percent, lagging behind the broader market (.TWII), which was flat.
($1 = 7.1616 RMB)
Reporting by Li Yimou; Additional reporting by Brenda Goh and Johann M Cherian, Tiyashi Datta and Aditya Soni in Bengaluru; Editing by William Mallard, Gerry Doyle and Elaine Hardcastle
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