World's Biggest iPhone Factory Recovers From Covid Restrictions

Picture: CNBC

Techspace - Production at the world’s biggest iPhone factory, disrupted since October by China’s COVID-19 restrictions and worker protests, is now running at nearly full capacity, according to the state-owned Chinese news outlet, Henan Daily.

The massive building located in Central China, owned by Apple supplier Foxconn, was running at 90% of planned production capacity at the end of December, the Henan Daily newspaper reported Tuesday. 

The company has previously stated that they are working to restore its production after the disruption caused by China’s strict COVID-19 regulations. Wedbush Securities analyst Daniel Ives estimated in November that the disruptions in Zhengzhou had been costing Apple roughly $1 billion a week in lost iPhone sales. 

According to a UBS report in November, the wait time for the latest 14 Pro and 14 Pro Max in the United States touched 34 days just before the Christmas and New Year’s Eve holidays because of supply chain constraints in China. One analyst from UBS called the wait time to be “extreme” for a product with such high demand. 

The Henan Daily separately quoted an executive responsible for Foxconn’s logistics as saying that, in the first two days of January, the volume of inbound and outbound shipments had reached the highest level in a year.

The report of a nearly full resumption of production comes one month after China abruptly ended three years of pandemic controls, setting off a huge wave of Covid infections.

According to a report in the Wall Street Journal, Foxconn’s founder, Terry Gou, played a major role in persuading Chinese Officials to hasten the lifting of COVID-19 restrictions on the factory. Gou was quoted as warning that strict Covid controls would threaten China’s central position in global supply chains.

Additionally, On Saturday, the government-owned broadcaster of Henan province, where the plant is located, quoted an executive from the factory as saying the plant's workforce was currently stable at 200,000 staff and that it had also stabilized its supply chain, enabling production capacity to recover. The plant is able to accommodate as many as 300,000 workers. The employees were each eligible for a maximum of 13,000 yuan ($1,883) per month in bonuses, but no mention was made of their base salaries.

The Root of The Problem

The troubles for Foxconn started in October when workers left the campus, located in the central Chinese province of Henan, because of concerns about Covid-related working conditions and shortages of food. Short on staff, bonuses were offered to workers to return.

Back in November, China ordered a seven-day lockdown of the area around Foxconn Technology Group’s main plant in Zhengzhou. The lockdown lasted until November 9, the local government said in a statement posted to its WeChat account. It ordered people and vehicles off the streets except for medical or other essential reasons.

The government notice emerged after Zhengzhou reported Covid-19 cases jumped to 359 for Tuesday, up more than three-fold from the day before. Officials there progressively imposed a web of smaller lockdowns and restrictions on areas as small as an apartment block.

In addition to the COVID-19 lockdown, violent protests broke out in November when the newly-hired staff said management reneged on their promises. Workers clashed with security officers before the company eventually offered them cash to quit and leave the site. These two situations caused a major reduction in the factory’s production and increased production time.

Now with the factory now running at nearly 90% capacity and fewer restrictions than it was before, we can expect iPhones to be more readily available across the United States and the rest of the world.