Foxconn's shutdown of major production bases due to the epidemic has had a major impact on the production capacity of Apple and other brands' mobile phones, but Foxconn is taking a variety of self-help measures to resume production and expand production capacity in other regions as soon as possible.
Recently, a severe coronavirus outbreak at Foxconn's Science and Technology Park in Zhengzhou, Henan Province, China, led to the temporary closure of the world's largest Apple iPhone factory. As Apple's most important supplier, Foxconn's Zhengzhou campus was once responsible for nearly 80% of the production of iPhone 14 series products. As a result of the spread of the pandemic, a large number of workers were forced to stay in the park, and the deterioration of living conditions sparked discontent, with tens of thousands of people trying to flee the factory. The incident has had a huge impact on Apple's supply chain, with iPhone 14 shipments expected to drop significantly. In the face of the crisis, Foxconn is going all out to save itself by raising wages and accelerating the expansion of production in other regions.
1. Outbreak and impact
Zhengzhou Foxconn Science and Technology Park is Foxconn's largest production base in Chinese mainland, with more than 200,000 employees. In late October, after the outbreak of the new crown epidemic in the park, the local government ordered a seven-day "static management", prohibiting people from going out and requiring all employees to take daily nucleic acid tests.
At the beginning of the outbreak, Foxconn tried to close production in the park, but due to improper quarantine measures, the number of confirmed cases increased. Workers expressed dissatisfaction with living conditions and epidemic prevention management, and tens of thousands of people decided to leave the factories on foot and return home. Some workers said their biggest fear was that it would be difficult to find a job once they were diagnosed.
This situation has dealt a heavy blow to Apple's supply chain. Apple acknowledged that shipments of iPhone 14 Pro and Pro Max models will be much lower than expected due to a significant drop in production capacity at Foxconn in Zhengzhou, and customers will have to wait longer to get their hands on the new products. Division predicts that Apple's mobile phone shipments may decrease by about 30% in November.
2. Foxconn's self-help measures
In order to retain employees and resume production, Foxconn has taken a number of measures:
Improve wages and benefits. Foxconn first gave a subsidy of 50 yuan per day to left-behind employees, and then increased the subsidy to 400 yuan per day. Foxconn also recruits 100,000 new employees through intermediaries with high salaries, with a monthly salary of more than 7,000 yuan.
Accelerate the pace of expansion in other regions. Foxconn said it would coordinate production capacity in Shenzhen and other places to fill the gap in the Zhengzhou plant. Foxconn has also stepped up its investment in India, planning to transfer some of its iPhone 14 production capacity to India.
It is to increase investment in automation and intelligent manufacturing. Foxconn plans to speed up the automation transformation in Zhengzhou and other places to improve the automation level of production lines to reduce dependence on manpower.
Seek diversified development of the industrial chain. Foxconn is increasing investment in emerging industries such as electric vehicles to reduce its dependence on the smartphone business.
3. Prospects
Although Foxconn is going all out to resume production, people believe that there will still be challenges in the short term. On the one hand, the uncertainty of the epidemic may continue to affect factory operations; On the other hand, the loss of a large number of workers will also bring a shortage of manpower to Foxconn.
In the long run, this incident may accelerate the pace of Foxconn's production capacity transfer to other countries. Apple has previously announced the transfer of iPhone 14 production capacity to India to hedge the risk of the epidemic in China. Other tech giants are also considering a "China+1" supply chain layout strategy, shifting production capacity to Southeast Asia and other regions.
It is also believed that because China's manufacturing industry has formed a scale effect and industrial cluster advantages, it is difficult to be completely replaced in the short term. This incident prompted Foxconn to accelerate the pace of automation transformation and the expansion of emerging industries, thereby improving its ability to resist risks.
Although Zhengzhou Foxconn has been hit hard, both Foxconn and Apple have taken action to deal with the crisis, and the resilience and global influence of China's manufacturing industry will not be shaken in the short term.
Although the epidemic has dealt a heavy blow to Foxconn, it is doing its best to save itself, and will further accelerate its global layout, improve the level of intelligent manufacturing, and expand emerging industries in the future to improve its ability to resist risks. The response measures of Foxconn and Apple will also promote the transformation and upgrading of China's manufacturing industry, and improve the flexibility and anti-risk ability.