Image Credits: NDTV
According to AFP, the shutdown of Foxconn’s Zhengzhou facility, the world’s largest manufacturer of iPhones, has highlighted some of the perils of relying on zero-Covid China’s manufacturing industry. Foxconn, Apple’s major subcontractor, has reported an increase in Covid-19 cases at its Zhengzhou facility, prompting the company to lock down the massive complex in an attempt to keep the virus at bay.
Following reports of poor working conditions at the hub, nearly hundreds of thousands of workers have reportedly left their work from the facility Foxconn is China’s largest secret sector company, employing over a million people across the country in its thirty factories and research facilities.
Nonetheless, Zhengzhou remains Taiwan’s crown jewel, producing iPhones in unprecedented volumes. “Normally, practically all iPhone manufacture takes place in Zhengzhou,” said Ivan Lam, an analyst with specialized firm Contrast.
Dependency Trouble for Apple
Apple manufactures more than 90% of its goods in China, which also happens to be one of its most important marketplaces. “Yet again for Apple, it is a horrible model in terms of the reliability of production systems,” Natixis bank Asia-Pacific CEO Alicia Garcia Herrero told AFP.
According to Dezan Shira and Associates, a consultancy firm, the organization’s heavy reliance on China “brings significant concerns, especially since the US-China trade war shows no indications of de-escalation.” The Zhengzhou facility, which opened in 2010, employs up to 300,000 people who live on-site throughout the year, creating a huge tech hub known as “iPhone city.”
It consists of three facilities, one of which manufactures the iPhone 14, Apple’s most recent phone model. Apple did not answer AFP’s request for clarification on what the lockout means for its manufacturing. Analyst Lam believes that the partial shutdown of work at the plant resulted in a loss of “10 to 30%” of the outcome, while a portion of the output was also temporarily shifted to other Foxconn locations in China.
According to Foxconn, the location is currently operating in a “closed circle,” with staff avoiding any touch with the outside world, while their daily incentives have been tripled. Thus according to Apple device analyst Ming-Chi Kuo, “this event might have a minimal influence” on worldwide iPhone manufacturing.
“Therefore, in accordance towards the zero-Covid methodology, Chinese suppliers should figure out how they can boost closed-circle work is completed on time even more,” he continued.
China’s alternative for the production
China is the final major economy to pursue a zero-Covid approach, including emergency lockdowns, mass testing, and widespread quarantines to combat emerging epidemics. As the implementation of the Zero COVID policy has been done, Apple is aggressively working to outsource its production to India and is considering Vietnam to wean itself off Chinese manufacturing.
In any event, it is not that straightforward – last year, about 7.5 million iPhones were manufactured in India, accounting for only 3% of Apple’s total manufacturing.
