Apple to Produce 6 Million Fewer Iphones Amid China Factory Chaos

Protests over COVID restrictions, pay lead to production slowdown in Zhengzhou

Protest outside the new Apple Store in Hong Kong for ignoring its suppliers‘ severe labor abuse issues. SACOM

Apple Inc.’s manufacturing hub in Zhengzhou, China will probably produce 6 million fewer iPhones this year after a month of intense COVID protocols and pay disputes led to mass protests and walkouts.

The extent of the production slowdown will depend on how fast Foxconn Technology Group, the Taiwanese company running the plant, can get its employees back to work on the iPhone 14 Max and Pro and fill thousands of vacant jobs, a person close to the matter told Bloomberg on Monday.

Key Takeaways

  • Apple will likely produce 6 million fewer Iphone 14 Pros and Maxs this year.
  • Protests have broken out at Apple's factory in Zhengzhou after COVID lockdowns have led workers to feel unsafe.
  • Many workers left after being offered two months' pay if they quit.

“Every week of this shutdown and unrest we estimate is costing Apple roughly $1 billion a week in lost iPhone sales," Daniel Ives, managing director of equity research at Wedbush Securities, told CNN Business. "Now roughly 5% of iPhone 14 sales are likely off the table due to these brutal shutdowns in China.”

Apple's woes come after protests erupted across China in cities such as Shanghai and Beijing in response to strict Covid lockdown policies, shortly after XI Jinping secured a third term in power. The protests are the largest displays of civil disobedience in the country since the Tiananmen Square massacre in 1989.

The demonstrations have also shown how reliant Apple is on the country for iPhone production. The chaos at the facility may accelerate Apple’s diversification of its production into other nations, such as India, experts have said. Apple’s stock fell 2.6% in morning trading.

The problems at the plant began in October, when the facility, which houses more than 200,000 people, was placed under lockdown due to a coronavirus outbreak. Many workers feared infection and saw the plant as unsafe. 

“You are sending us to death,” one worker told a plant manager.

Thousands of workers fled the plant on foot, although many returned or were replaced after the company promised to quadruple daily bonuses. But the company didn't fulfill those promises and workers began to revolt last week, rocking police cars and blowing past outnumbered security guards.

The protests ended after FoxConn promised to pay two months' wages to those who choose to quit. 

The plant hasn't said if it has filled the vacancies yet for those who have quit or if it has any plans on how to get production back to normal.

Apple’s stock has fallen 20% in the last 12 months, less than the 29% drop in the Nasdaq Composite Index.

Article Sources
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  1. Bloomberg. "Apple to Lose 6 Million iPhone Pros From Tumult at China Plant."

  2. CNN Business. "Apple has a huge problem with an iPhone factory in China."

  3. Reuters. "Xi Jinping faces stiffest challenge to rule as Covid outrage sparks mass protests."

  4. Yahoo! Finance. "Apple Inc. Stock."

  5. Bloomberg. "Violent Protests Erupt at Apple’s Main iPhone Plant in China."

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