The closure of the factory in Zhengzhou by Foxconn, the world’s largest iPhone maker, has highlighted some of the risks of depending on the sector, analysts told AFP. production of Zero-Covid.
Foxconn, AppleTheir main subcontractor, has seen a surge in Covid-19 cases at their Zhengzhou location, leading the company to close the vast complex in an effort to contain the virus- withdraw.
Images then emerged of panicked workers running from the site after allegations of poor conditions at the facility employing hundreds of thousands of workers.
Foxconn is China’s largest private-sector employer, with more than a million people working across the country in about 30 factories and research institutes.
But Zhengzhou is the crown jewel of the Taiwanese giant, launching iPhones in numbers not seen anywhere else.
“In a normal situation, most iPhone production takes place in Zhengzhou,” said Ivan Lam, an analyst at Counterpoint.
Risk of ‘strong dependence’
Apple makes more than 90% of its products in China, which is also one of Apple’s most important markets.
Alicia Garcia Herrero, head of Asia Pacific at Natixis bank, told AFP: “For Apple, this is once again a bad example of the stability of the production chain.
According to consulting firm Dezan Shira & Associates, the company’s heavy dependence on China “brings potential risks, especially as the US-China trade war shows no sign of de-escalating”.
Opened in 2010, the Zhengzhou factory employs up to 300,000 people who live on site year-round – creating a vast technology hub known as “iPhone city”.
It is made up of three factories, one of which produces the iPhone 14 – Apple’s latest phone model.
Apple did not respond to AFP’s request for comment on exactly how the shutdown would affect its manufacturing operations.
Analyst Lam estimated the partial shutdown at the site would result in a “10 to 30 percent” loss in output, but said part of the output had also been temporarily moved to other Foxconn locations. in China.
According to Foxconn, the site currently operates a “closed loop” with workers avoiding all contact with the outside world, while their daily bonus has quadrupled.
Analyst Ming-Chi Kuo, who specializes in Apple products, estimates: “This incident may have a limited impact” on iPhone production worldwide.
He added: “But suppliers in China must learn how to improve production efficiency in a closed process in response to the zero-Covid policy.
Look elsewhere
China is the last major economy to commit to a zero-Covid strategy, persisting with rapid lockdown measures, mass testing and prolonged quarantine in an effort to quell emerging outbreaks.
But the new variations have tested local officials’ ability to quell outbreaks faster than they can spread, leaving much of the country living under a mosaic of Covid curbs. change.
Apple has begun outsourcing part of its production to India and is eyeing Vietnam in an attempt to wean itself off Chinese manufacturing – a trend accelerated by Covid.
But it’s not so simple – last year, nearly 7.5 million iPhones were made in India, just 3% of Apple’s total output.
“It is very difficult to increase the capacity of factories (in India),” Lam said.
