Inside the Covid uprising at the Zhengzhou iPhone City factory

Executives at the world’s largest iPhone factory breathed a sigh of relief when the local government of Zhengzhou lifted a five-day lockdown on much of the Chinese city on Tuesday.

After more than a month of disruption caused by the Covid-19 outbreak at the plant, “it reminds us that we will eventually return to normal,” said the head of human resources at foxconnwho owns and operates the factory town.

But the troubles are far from over. The Taiwanese contract manufacturer is still struggling to staff assembly lines in the midst of Apple’s pre-holiday season. delays in deliveries Premium iPhones, almost all made in Zhengzhou, are on the rise.

Violation and Rare Apple Warning that supply constraints will hinder its revenue growth highlight the vulnerabilities created by the US tech giant’s reliance on a Chinese manufacturing model that has turned it into the world’s most valuable public company.

“The Zhengzhou fiasco is talked about as a result of China’s COVID-19 policy, but it’s actually a systemic flaw in manufacturing,” said a person who has been auditing China’s electronics supply chain for more than 10 years. than a decade. “Fault lines have been between the company, subcontractors and local governments and that has been a problem for many years.”

When Covid-19 infections began to be reported in Zhengzhou in mid-October, Foxconn placed its plant on a “closed loop” by forbidding personnel to leave the facility. But as infections began to spread inside the factory town, many workers fled campus

Foxconn employees wait to board shuttle buses in Zhengzhou, Henan Province, China, to their hometowns, October 2022
Foxconn employees wait to catch buses to their hometowns after reports of the Covid-19 outbreak in Zhengzhou in October © VCG/Getty Images

Those who remain paint a picture of utter chaos.

A logistician with the last name On, who worked at Foxconn for 10 years, used to live outside the factory, but, fearing that he would be kicked out of the factory in October, he moved to the warehouse. “I have been living here for half a month now,” he said on November 2. “I use wood planks and fiberboard as a bed and throw in a blanket.”

Despite the fact that the company notified the workers to be divided into two groups, and ordered those who worked to be quarantined for five days, he managed to stay. “I ended up being quarantined for just one day,” he said.

Others were less fortunate. Workers said their colleagues and relatives at the plant were forced to quarantine in sealed dormitory rooms along with half a dozen other workers and had no idea if they had the coronavirus or not. Others have said they received “abnormal” Covid-19 test results and developed symptoms, although they were never officially told they tested positive.

As iPhone production was about to ramp up, Foxconn was in urgent need of new employees after a mass exodus in October. As is often the case during labor shortages, the company has hired thousands of seasonal workers through local governments.

However, Foxconn has registered temporary employment under the terms used for long-term employees, with lower pay than promised by the government. This caused violent protests by seasonal workers, which were then violently suppressed by the police.

Security personnel attack a protester with batons at a Foxconn factory in Zhengzhou, Henan, China in November 2022
Violent protests erupted after seasonal workers were paid less than promised by the government © AP

To get rid of the dissatisfied, the company offered 10,000 yuan ($1,414) to those who want to leave – an offer that was accepted by more than 15,000 people, two people at the plant said. But now, as Foxconn struggles to staff its production lines, it is promising bonuses for new hires and workers who bring on additional employees.

“Yesterday they came up with an idea, today they changed it, and tomorrow, maybe they will change it again,” said He, a worker. “You never understand what Foxconn is trying to do.”

Foxconn executives said they were rushing to respond to ever-changing government demands. “The problem is that we continue to face issues that we have no jurisdiction over,” one of them said.

The head of the executive branch added that thousands of workers were transferred to quarantine facilities at the request of local authorities, who then did not provide food for those in quarantine. According to a top manager, Foxconn offered to return some of the staff, but was unable to deliver food on time.

The pay glitch that sparked the riot also appears to have been caused by a misunderstanding between the company and local authorities.

“Many local government employees, like me, are not familiar with Foxconn’s remuneration, so technically we can’t promise wages or bonuses,” said an official in Pingdingshan who helped recruit local workers for Foxconn. “However, some did make false promises.”

Such problems cause deja vu. In the 20-year history of Foxconn’s production for Apple in China, activists have again and again accused the company of violating labor rights.

One of the most common problems is the use trainee students employed by the state as ordinary workers. Complaints about underpaid workers often came after employment brokers promised terms that Foxconn did not confirm. Some past instances of worker riots have taken place in living quarters on the factory campus but have been managed by outside contractors.

Foxconn’s heavy reliance on local governments, brokers and subcontractors began in response to the company’s worst disaster: after suicide wave among the workers at what was then the largest factory in Shenzhen in 2010 caused everyone’s attention, the management tried to change the model of their factory city.

Shoppers look at an iPhone 14 at an Apple store in Beijing, China in November 2022
Delays in premium iPhone models are growing as Foxconn struggles to staff assembly lines © Wu Hao/EPA-EFE

One of the conclusions was that he would no longer own and manage all the objects on his own. Foxconn founder Terry Gow at the time also promised to replace many workers with robots and demanded that customers take on most of the financial burden needed to keep an increasingly demanding workforce happy.

However, the only significant change has been the move of production inland, where wages are still lower than in China’s more developed coastal provinces.

But the pandemonium in Zhengzhou indicates that even this attitude is unsustainable. Foxconn Chairman Yang Liu told investors this month that the expansion of production outside of China was driven by geopolitics, not a zero-spread Covid policy. But industry insiders say the unrest at the factory should have accelerated Apple’s efforts to diversify its supply chain.

Although Foxconn and its smaller counterparts have opened factories in Vietnam, Indonesia and India, their capacity is minuscule compared to China.

“We’re probably at 10-15 percent completion if we expect capacity in Southeast Asia and India to be on par with China,” said Patrick Chen, CLSA head of research in Taiwan.

“It will be very difficult to speed up this process, but now Apple has a stronger incentive,” said a senior executive at a rival iPhone assembler. “The lesson from this should be that the sources should be more dispersed.”

Reporting Katherine Hill in Taipei, Nian Liu and Ryan McMorrow in Beijing, Qianer Liu and Gloria Li in Hong Kong