Foxconn Factory Chaos Means More IPhone Delays Over The Holiday Period

The Chinese city of Zhangzhou - home to Foxconn's largest iPhone factory - has lifted COVID-19 restrictions, but it could still be too late to help Apple bounce back from a serious holiday shortage of iPhone 14 Pro and Pro Max devices.

According to tried-and-true Apple analyst Ming-Chi Kuo, Q4 iPhone shipments may still be down by a lot – Kuo cuts 15-20 million devices from market estimates of 80-85 million units.

Lockdowns at the factory began in October alongside similar restrictions in nearby Zhangzhou (the restrictions lifted today were from a five-day period beginning last week) when several employees tested positive for coronavirus. Foxconn responded by banning workers from public transportation and cafeterias and requiring them to only travel via certain marked routes.

As a result of the restrictions, Kuo said the average utilization rate of the Zhengzhou iPhone plant was just 20 percent in November. He expects that to improve to 30-40 percent in December, though it's unclear if lockdowns being lifted would improve that rate.

Since Foxconn's lockdowns began last month, protests have erupted at the Zhengzhou plant, with workers smashing windows and surveillance cameras, demanding payment and calling for better treatment of employees. Foxconn denied the protests have had any effect on production.

Kuo appears to believe otherwise, and cut his iPhone prediction numbers based on the protests, he said. 

According to the South China Morning Post, Foxconn typically hires around 300,000 people to handle the holiday season rush on electronics, but the company is believed to have lost tens of thousands of employees since lockdowns began.

Foxconn has reportedly offered former factory workers bonuses to return, promising ¥3,000 ($423) for those that stay 30 days, and an additional ¥3,000 for staying 26 days in December. Returning employees that show up for at least 23 days in January will get an additional ¥6,000.

China in the rear-view mirror

Per the SCMP, approximately 80 percent of base iPhone 14 devices are manufactured in the Zhengzhou factory, and 85 percent of iPhone Pro devices are manufactured there.

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With so much production consolidated in one place, and China's lockdowns continuing to be severe, doing business in the country is increasingly questionable for big companies like Apple, which Kuo said could lose 20-30 percent of its revenue in Q4 due to the Foxconn fiasco.

Apple has already begun to diversify its supply chain, and Foxconn has come along with it, announcing an expansion of its production capacity in India, where it already has plants, by saying it plans to quadruple its workforce in the subcontinent.

According to Reuters, Apple has started to move production away from China. In 2019, between 44 and 47 percent of Apple's suppliers were producing goods in China, which fell to 41 percent in 2020, and 36 percent last year. 

As mentioned above, reports have been coming in today that Zhengzhou has lifted its COVID-19 lockdown, which is sure to be good news for Apple and antsy holiday shoppers. As of writing, iPhone 14 Pro and Pro Max devices, regardless of configuration, are showing on Apple's website as not shipping until December 30 at the earliest. 

Whether Apple will be able to bounce back from iPhone production delays caused by chaos in Zhengzhou in time for the holidays is unclear – we've asked Apple and will update this story as we get more information. ®