The lockdown of Foxconn Technology Group’s (富士康科技集團) Zhengzhou factory, which is the world’s largest producer of iPhones, has highlighted some of the risks of relying on China’s manufacturing sector amid its ‘zero COVID’ policies, analysts said.
Foxconn — known as Hon Hai Precision Industry Co (鴻海精密) in Taiwan and Apple Inc’s principal subcontractor — has seen a surge in COVID-19 cases at its Zhengzhou site, leading the company to lock down the vast complex in a bid to keep the virus in check.
Images soon after emerged of panicking workers fleeing the site on foot in the wake of allegations of poor conditions at the facility, which has hundreds of thousands of employees.
Photo: Carlos Garcia Rawlins, Reuters
Foxconn is China’s largest private-sector employer, with more than 1 million people working across the country in about 30 factories and research institutes.
However, Zhengzhou is the Taiwanese giant’s crown jewel, churning out iPhones in quantities not seen anywhere else.
“In a normal situation, almost all the iPhone production is happening in Zhengzhou,” Counterpoint analyst Ivan Lam (林科宇) said.
Apple manufactures more than 90 percent of its products in China, which is also one of its most important markets.
“For Apple, it is once again a bad example in terms of the stability of production chains,” Natixis SA Asia-Pacific manager Alicia Garcia Herrero said.
The company’s heavy dependence on China “brings potential risks, especially when the US-China trade war shows no signs of de-escalating,” consulting firm Dezan Shira and Associates said.
Opened in 2010, the Zhengzhou factory employs up to 300,000 people who live on-site throughout the year, creating a sprawling tech hub known as “iPhone city.”
It is made up of three factories, one of which produces the iPhone 14 — Apple’s newest handset model.
Lam said that the partial stopping of work at the site resulted in a loss of “10 to 30 percent” of output, adding that part of the production has been temporarily moved to other Foxconn sites in China.
The site is currently operating a “closed loop” with the workers avoiding all contact with the outside world, while their daily bonuses have been quadrupled, Foxconn said.
“This incident may have a limited impact,” on worldwide iPhone production, said TF International Securities Group Co (天風國際證券) analyst Kuo Ming-chi (郭明錤), who specializes in Apple products.
“But suppliers in China must learn to improve closed-loop production efficiency in response to the ‘zero COVID’ policy,” he added.
China is the last major economy committed to a ‘zero COVID’ strategy, persisting with snap lockdowns, mass testing and lengthy quarantines in a bid to stamp out emerging outbreaks.
Highly transmissible variants have tested local officials’ ability to contain outbreaks faster than they can spread, causing much of the country to live under an ever-changing mosaic of COVID-19 restrictions.
Before the COVID-19 pandemic, Apple had begun outsourcing part of its production to India, and is considering Vietnam in a bid to wean itself off Chinese manufacturing. The pandemic accelerated the process.
The transition could take a while. Last year, nearly 7.5 million iPhones were made in India, just 3 percent of Apple’s total production.
“Increasing the capacity of factories [in India] is difficult,” Lam said.
Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) came under pressure yesterday after a report that Apple Inc is looking to shift some orders from the Taiwanese company to Intel Corp. TSMC shares fell NT$55, or 2.4 percent, to close at NT$2,235 on the local main board, Taiwan Stock Exchange data showed. Despite the losses, TSMC is expected to continue to benefit from sound fundamentals, as it maintains a lead over its peers in high-end process development, analysts said. “The selling was a knee-jerk reaction to an Intel-Apple report over the weekend,” Mega International Investment Services Corp (兆豐國際投顧) analyst Alex Huang
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to remain Apple Inc’s primary chip manufacturing partner despite reports that Apple could shift some orders to Intel Corp, industry experts said yesterday. The comments came after The Wall Street Journal reported on Friday that Apple and Intel had reached a preliminary agreement following more than a year of negotiations for Intel to manufacture some chips for Apple devices. Taiwan Institute of Economic Research (台灣經濟研究院) economist Arisa Liu (劉佩真) said TSMC’s advanced packaging technologies, including integrated fan-out and chip-on-wafer-on-substrate, remain critical to the performance of Apple’s A-series and M-series chips. She said Intel and Samsung
POWER BUILDUP: Powered by Nvidia’s B200 Blackwell chips, the data center would support MediaTek’s computing power demand and business growth, the company said Smartphone chip designer MediaTek Inc (聯發科) yesterday launched a new artificial intelligence (AI) data center with a maximum capacity of 45 megawatts to meet its rising demand for computing power required to develop new advanced chips for AI applications. The company has completed the first-phase computing power buildup at the data center in Miaoli County’s Tongluo Township (銅鑼), providing 15 megawatts of capacity to support its research and development (R&D) capabilities, despite an industrywide shortage of key components, MediaTek said. Supply constraints have plagued a wide range of key components, including memory chips, solid-state drives, power supply units and central
TRANSITION: With the closure, the company would reorganize its Taiwanese unit to a sales and service-focused model, Bridgestone said Bridgestone Corp yesterday announced it would cease manufacturing operations at its tire plant in Hsinchu County’s Hukou Township (湖口), affecting more than 500 workers. Bridgestone Taiwan Co (台灣普利司通) said in a statement that the decision was based on the Tokyo-based tire maker’s adjustments to its global operational strategy and long-term market development considerations. The Taiwanese unit would be reorganized as part of the closure, effective yesterday, and all related production activities would be concluded, the statement said. Under the plan, Bridgestone would continue to deepen its presence in the Taiwanese market, while transitioning to a sales and service-focused business model, it added. The Hsinchu
RSS