iPhone Factory Lockdown Illustrates Risks Of Dependence On China
According to analysts speaking to AFP, the lockout of Foxconn‘s Zhengzhou facility, which makes the majority of the world’s iPhones, has brought to light some of the dangers associated with relying solely on China’s manufacturing industry.
The primary subcontractor for Apple, Foxconn, has experienced an increase in Covid-19 cases at its Zhengzhou location, prompting the company to lock down the enormous complex in an effort to contain the virus.
Following reports of bad working conditions at the factory, which employs hundreds of thousands of people, images of terrified employees running away from the scene on foot appeared.
Over a million people are employed by Foxconn, the largest private employer in China, at its thirty factories and research facilities spread out over the nation.
The Taiwanese giant’s gem, though, is Zhengzhou, which produces iPhones in unprecedented amounts.
Ivan Lam, an analyst with the specialized company Counterpoint, stated that “in a typical situation, practically all of the iPhone production is happening in Zhengzhou.”
Strong reliance risk
China, one of Apple’s most significant markets, is where more than 90% of its goods are made.
According to the stability of supply chains, “Apple is once again setting a poor example,” said Alicia Garcia Herrero, Asia-Pacific manager for Natixis bank, to AFP.
According to Dezan Shira & Associates, a consultancy organization, experts claim that the company’s substantial reliance on China “brings potential hazards, especially as the US-China trade war shows no indications of de-escalating.”
The Zhengzhou facility, which opened in 2010, employs up to 300,000 workers who year-round reside on-site, resulting in a huge tech hub dubbed as “iPhone city.”
It consists of three manufacturing facilities, one of which creates the iPhone 14, Apple’s most recent smartphone model.
Apple declined to answer when AFP asked how the lockdown would specifically impact its operations.
The production at the plant was lost by “10 to 30 percent,” according to analyst Lam, who also noted that some of the production was temporarily shifted to other Foxconn facilities in China.
Foxconn claims that the factory is currently running as a “closed loop,” with the employees being cut off from the outside world and receiving doubled daily bonuses.
According to Apple product analyst Ming-Chi Kuo, “This incident may have a limited impact” on global iPhone production.
But as a result of the zero-Covid policy, suppliers in China must learn to increase closed-loop production efficiency, he continued.
As the final major economy to commit to a zero-Covid strategy, China continues to implement sudden lockdowns, extensive testing, and protracted quarantines in an effort to contain spreading epidemics.
A large portion of the nation now lives under an ever-changing mosaic of Covid restrictions as a result of new varieties that have taxed local authorities’ capacity to put out flare-ups before they spread.
In an effort to wean itself off Chinese manufacture, Apple has already started outsourcing some of its production to India and is considering Vietnam. Covid has hastened this process.
But it’s not quite that straightforward; only 3% of Apple’s total manufacturing, or close to 7.5 million iPhones, were produced in India last year.
It’s challenging to increase the capacity of factories (in India), Lam remarked.