China factory unrest impacts iPhone supply

Foxconn’s flagship iPhone plant in China is set to see a further reduction in November shipments after the latest bout of worker unrest as thousands of employees quit.

The world’s largest Apple iPhone factory has been grappling with strict COVID-19 restrictions that have fuelled discontent among workers and disrupted production ahead of Christmas and January’s Lunar New Year holiday.

Many workers were either put into isolation or fled the plant.

Following Wednesday’s escalation that saw workers clash with security personnel, Foxconn could now see more than 30 per cent of the site’s November production affected, up from an internal estimate of up to 30 per cent when the labour issues erupted in late October, a source with direct knowledge of the matter said on Friday.

The factory is the only one that makes premium iPhone models, including the iPhone 14 Pro, and the source said it is unlikely to resume full production by the end of this month.

Foxconn, formally known as Hon Hai Precision Industry Co, declined to comment. 

Apple, which said on Thursday it had staff at the factory, did not respond to a request for comment on Friday.

“The worker unrest at Foxconn’s plant in China could weigh on Apple’s November iPhone shipments,” Victoria Scholar, head of investment at Interactive Investor said, as concerns grow over Apple’s ability to deliver products for the busy holiday period.

Apple shares were down 1.9 per cent in late morning trade on Friday, while the benchmark Nasdaq index was down 0.3 per cent.

“Apple is still viewed as one of the more resilient stocks in the tech sector … However, Apple continues to hold off from providing official guidance given the macroeconomic uncertainty,” Scholar said.

United States Best Buy Co Inc said on Tuesday it expected high-end iPhones to be in short supply this holiday season. 

Analysts said iPhones at Apple stores in the US during the Black Friday shopping season were also down from a year earlier and it was taking longer to replenish stocks.

Some new recruits hired in recent weeks by Foxconn claimed they were misled over compensation benefits at the factory and others complained about sharing dormitories with colleagues who had tested positive for COVID-19.

Foxconn on Thursday apologised for a pay-related “technical error” when hiring and later offered 10,000 yuan ($A2,076) to protesting new recruits who agreed to resign and leave.

The source said more than 20,000 workers, mostly new hires not yet working on production lines, took the money and left. 

Videos posted on Chinese social media on Friday showed crowds and long lines of luggage-laden workers queuing for buses.

Before its troubles began, the plant employed more than 200,000 staff.