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(Bloomberg) — Foxconn Technology Group will bring aid production online and raise hourly wages by more than a third, after an exodus of staff threatened to disrupt production at the world’s largest iPhone factory before the holidays.
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Foxconn, whose indexed vehicle is Hon Hai Precision Industry Co. , is grappling with growing fears that a covid outbreak at its main plant in Zhengzhou could hurt production just as Apple Inc. It is preparing for the end of the year season. Shares fell 1. 4% on Monday, the worst drop in 3 weeks.
Social media erupted over the weekend with photos and videos of staff leaving the Zhengzhou factory, some on foot, to return to their hometowns miles away. They were looking to escape by following Covid prevention measures that have left much of the 200,000 staff suffering with insufficient living conditions. Other videos showed local citizens providing food and shelter to some departing staff. Bloomberg has not verified the authenticity of social media content.
To keep factories running at full speed, Foxconn is raising hourly wages by as much as 36 percent to about 38 yuan ($5. 20) an hour for key positions, with the first days of iPhone 14 production around September, other people familiar with the matter said. , asking not to be known because the movement is not public.
On the operations side, Foxconn said it could increase capacity at other sites. The Taiwanese company also makes iPhones at a factory in Shenzhen, which, along with Zhengzhou, makes most of the world’s iPhones. Company representatives declined to comment on the salary plans.
“Further developments will be vital, as the fourth quarter is the peak season for iPhone shipments,” Morgan Stanley analysts wrote. “The potential impact on iPhone production is worth watching, as Zhengzhou is one of Hon Hai’s main production sites, especially for iPhone assembly. “. “
Read more: Workers leave iPhone factory to escape Covid restrictions
The emerging tensions underscore the economic and social prices of Xi Jinping’s Covid Zero policy, a rigorously controlled formula of mass lockdowns and lockdowns that has provoked growing resentment. It also shows the potential threat to chains of origin and global products from China’s approach.
Discontent is brewing at Foxconn’s Zhengzhou plant. The emergence of instances of Covid has led to the status quo of a closed-loop system, where workers’ movements are strictly limited. production site known as “iPhone City”.
At one point, only production line staff received boxes of food, while other people were inflamed or afraid to leave the dormitories provided by their company and received more basic dishes such as bread and instant noodles, Bloomberg News reported. On Monday, Foxconn said the local government had agreed to let cafeterias reopen on campus.
It is known how many employees were allowed to leave Foxconn. The company hires many transient employees from neighboring regions to gather electronics, adding Apple’s newest iPhone 14 devices. Foxconn last week described the scenario as a “small” outbreak.
“We are deeply aware that this is a ‘protracted war’ in terms of concern for more than 200,000 employees and their safety” in Zhengzhou, Foxconn said at an inventory market presentation on Monday.
“The operation of Zhengzhou Park, in coordination with the government’s epidemic prevention, is gradually under control,” Foxconn said in a brief Sunday. “The Group will also coordinate backup production capacity with our other fleets to lessen any potential impacts. “
The discontent comes at a major time for Apple, which introduced the iPhone 14 in an unprecedented drop in global demand for electronics. Although it is doing better than other smartphone makers, it has given up on plans to ramp up production of its new iPhones this year after an expected buildup in demand failed, Bloomberg reported. Apple on Thursday reported higher-than-expected results, but warned of a slowdown in the holidays.
Any disruption in Zhengzhou threatens to scold Apple’s finely orchestrated chain. Thousands of parts from Europe to Asia are shipped to Zhengzhou, manually assembled into devices, and then shipped to the rest of the world.
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