Foxconn’s ‘iPhone city’ in China lifts production back to 90 per cent as chairman warns of challenging 2023

  • Production at Foxconn’s Zhengzhou iPhone factory has resumed to about 90 per cent of peak capacity, a manager told Chinese state media
  • In a New Year’s message, Foxconn chairman and CEO Young Liu said the Taipei-based company may see ‘a more difficult and challenging path’ ahead

The world’s largest iPhone factory, run by Foxconn Technology Group in the central Chinese city of Zhengzhou, is gradually recovering from disruptions caused by the country’s pandemic controls, even as the company chairman warned of more challenges ahead.

In a front-page story on Monday, state media Henan Daily quoted Wang Xue, a deputy manager with the plant, as saying that production had reached about 90 per cent of maximum capacity as of December 30.

“We are updating our clients on a daily basis about production conditions,” Wang said, without naming Apple or any other specific customers. “Orders are good, and production will reach its peak in the coming months.”

The factory, which has been rocked by an exodus of tens of thousands of employees and violent workers’ protests amid a Covid-19 outbreak that began in late October, currently employs 200,000 workers, who have been promised up to 13,000 yuan (US$1,880) in monthly bonuses, Wang added.

Foxconn started to offer extra incentives late last year in a desperate move to entice workers who had left earlier, but were not part of the protests, to return. It pledged another 5,000 yuan bonus for employees who agreed to work until late March.

In a New Year’s message, Foxconn chairman and CEO Young Liu said the Taipei-based company “encountered unprecedented challenges” in 2022 and may see “a more difficult and challenging path” in 2023, which will mark the 35th anniversary of Foxconn’s operations in mainland China.

“In the face of the sudden pandemic outbreak this winter, [Foxconn’s] mainland campuses, especially the Zhengzhou campus, were faced with the twofold tests of taking care of our employees’ health and safe production,” Liu wrote.

Because of the turmoil at the Zhengzhou plant,Kuo Ming-chi, an analyst covering Apple at TF International Securities, in late November slashed his forecast for total iPhone shipments in the December quarter by a fifth to between 70 million and 75 million units, with output of the higher-end iPhone 14 Pro and 14 Pro Max falling short by 15 million to 20 million units.

Taiwan-listed Foxconn, formally known as Hon Hai Technology Group, recorded 13.5 per cent revenue growth for the first 11 months of 2022, reaching 1.37 trillion yuan. However, November sales slid 11 per cent, according to the company’s financial report.

Foxconn’s mainland business is important not only to the company itself. Since 2010, the firm has accounted for 60 and 80 per cent of imports and exports in Henan province and its capital Zhengzhou, respectively, according to Henan Daily.

In the first three quarters of last year, nearly half of Henan’s total import and export values were mobile phones, the report said.

As China struggles to cope with surging infections and a shortage of medical supplies after a dramatic U-turn on its three-year zero-Covid policy, however, Apple is said to be accelerating plans to reduce its dependence on the country’s factories.

Apple is reportedly relocating some production of MacBooks to Vietnam, a move that had been in the works since 2020. The initial batch of Apple’s laptop computers is expected to ship from the Southeast Asian country as early as May, according to a recent report by Nikkei Asia Review.

Foxconn also recently injected US$500 million into an Indian subsidiary through the purchase of 4 billion shares, according to a filing to the Taiwan Stock Exchange last month.


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