Inside the Covid uprising at Zhengzhou's 'iPhone City' factory

Inside the Covid uprising at Zhengzhou’s ‘iPhone City’ factory

Officials at the world’s largest iPhone factory breathed a sigh of relief when Zhengzhou’s local government lifted a five-day lockdown on most of the Chinese city on Tuesday.

After more than a month of disruption triggered by a Covid-19 outbreak at the factory, “it reminds us that we will get back to normal eventually,” said a human resources manager at Foxconn, which owns and operates the city. -factory.

But the troubles are far from over. The Taiwanese subcontractor is still struggling to staff assembly lines at the height of Apple’s pre-holiday peak season, and delays in delivery of high-end iPhone models, almost all made in Zhengzhou , multiply.

The disruption and Apple’s rare warning that supply constraints will hamper its revenue growth highlights the vulnerabilities created by the US tech giant’s reliance on a Chinese manufacturing model that has turned it into the most valuable listed company in the world.

“The Zhengzhou debacle is being discussed as a result of China’s zero Covid policy, but what it really shows are systemic weaknesses in the organization of manufacturing,” said a person who conducts research. electronics supply chain audits in China for more than a decade. “The fault lines were between the company, the contractors and the local government, and that was a problem for many years.”

When Zhengzhou began recording Covid-19 infections in mid-October, Foxconn placed its factory under “closed loop” management, barring staff from leaving the site. But as infections began to spread inside the industrial city, many workers fled the campus.

Foxconn staff wait to board shuttles in Zhengzhou, Henan, China to their hometowns in October 2022
Foxconn staff wait to take shuttles to their hometown after a Covid-19 outbreak was reported in Zhengzhou in October © VCG/Getty Images

Those who remained paint a picture of utter chaos.

A logistics worker surnamed He, who has worked at Foxconn for 10 years, lived offsite, but fearing he would be kicked out of the factory in October, he moved into the warehouse. “I have been living here for half a month,” he said on November 2. “I use wood panels and fiberboard as a bed and throw my quilt in it.”

Even though the company informed the workers that they had to be split into two groups, with those who worked to be quarantined for five days, he managed to stay. “I was only quarantined for one day in the end,” he said.

Others were less fortunate. Workers described co-workers and relatives at the factory being forced to quarantine in sealed dormitories with up to half a dozen other workers and little idea whether they had coronavirus or not. Others said they received “abnormal” Covid-19 test results and developed symptoms without ever being officially told they had tested positive.

As iPhone production needed to ramp up, Foxconn was in dire need of new employees following the October exodus. As often happens in times of labor shortages, the company hired thousands of seasonal workers through the local government.

However, Foxconn recorded the temporary hires on terms used for long-term staff, lower than the salary promised by the government. This sparked violent protests by seasonal workers, which were then forcefully suppressed by the police.

Security personnel attack a protester with batons at a factory operated by Foxconn in Zhengzhou, Henan, China in November 2022
Violent protests erupted after seasonal workers were paid less than the government promised © AP

To get rid of disgruntled people, the company offered 10,000 Rmb ($1,414) to those willing to leave – an offer accepted by more than 15,000, according to two people at the factory. But now, as Foxconn struggles to staff its production lines, it is promising bonuses for new hires and workers who bring in additional employees.

“They had an idea yesterday, then they changed it today, and maybe they will change it again tomorrow,” said He, the worker. “You never understand what Foxconn is trying to do.”

Foxconn executives said they were rushing to meet ever-changing government demands. “The problem is that we kept running into issues where we don’t have jurisdiction,” said one.

The executive added that thousands of workers were moved to quarantine facilities at the request of local authorities, who then failed to provide food to those quarantined. According to the executive, Foxconn offered to take over some of the staff, but then struggled to deliver food in time.

The pay hiccup that sparked the riot also appears to have been caused by miscommunication between the company and local authorities.

“A lot of local officials like me don’t know about Foxconn compensation, so technically we can’t promise salaries or bonuses,” said a Pingdingshan official who helped hire local workers for Foxconn. “However, some still offered false promises.”

Such problems are deja vu. In Foxconn’s 20-year manufacturing history for Apple in China, activists have accused the company of labor rights abuses time and time again.

One of the most frequent problems has been the use of student interns recruited by the government as normal workers. Complaints about underpaid workers have frequently arisen after job brokers promised terms that Foxconn did not confirm. Some past cases of worker unrest have occurred in accommodations on the factory campus, but managed by outside contractors.

Foxconn’s heavy reliance on local government, brokers and contractors themselves began in response to the company’s worst disaster: after a wave of suicides among workers at its most large factory in Shenzhen in 2010 sparked global scrutiny, management tried to change its factory city model.

Customers look at the iPhone 14 phone at an Apple store in Beijing, China in November 2022
Delivery delays for high-end iPhone models mount as Foxconn struggles to staff assembly lines © Wu Hao/EPA-EFE

One of the conclusions was that she would no longer own and manage all the facilities herself. Foxconn founder Terry Gou also pledged at the time to replace many workers with robots and demanded that customers shoulder more of the financial burden needed to satisfy a growing workforce. more demanding.

However, the only big change has been the shift of production inland, where wages are still lower than in China’s more developed coastal provinces.

But the Zhengzhou pandemonium indicates that even this configuration is not viable. Foxconn Chairman Young Liu told investors this month that manufacturing expansion outside of China was driven by geopolitics rather than zero-Covid policy. But industry insiders said the factory turmoil should accelerate Apple’s efforts to diversify its supply chain.

Although Foxconn and its smaller peers have set up factories in Vietnam, Indonesia and India, this capacity is tiny compared to China.

“We probably only have a 10-15% completion rate if we expect capacity in Southeast Asia and India to be on par with China,” said Patrick Chen, head of research at CLSA in Taiwan.

“It will be very difficult to speed this up, but now Apple has a stronger incentive,” said a senior executive at a rival iPhone assembler. “The lesson from this has to be that the supply needs to be more spread out.”

Reporting by Kathrin Hille in Taipei, Nian Liu and Ryan McMorrow in Beijing, Qianer Liu and Gloria Li in Hong Kong

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