China imposes new shutdown around major Apple iPhone factory

China imposes new shutdown around major Apple iPhone factory

(Reuters) – China has requested the construction of an industrial complex that will include an iPhone factory belonging to Foxconn (2317.TW) to enter a seven-day shutdown on Wednesday, in a move aimed at ramping up pressure on an Apple supplier as it rushes to quell worker discontent at the base.

Central China’s Zhengzhou Airport Economic Zone said it would impose “silent management” measures with immediate effect, including banning all residents from going outside and only allowing approved vehicles on the roads within that zone.

She added that the restrictions will continue until the ninth of November. The lockdown marks a re-tightening of measures in Zhengzhou, which unexpectedly lifted a near-lockdown on nearly 13 million of its residents the day before. The city reported 358 cases of infection locally on Tuesday, up from 95 the day before.

Strict controls and immediate lockdowns across China have fueled discontent among the population, hampered economic growth and caused huge psychological and financial losses to individuals and businesses.

Foxconn, officially Hon Hai Precision Industry Co Ltd, is Apple’s largest iPhone manufacturer, accounting for 70% of iPhone shipments globally. Most of the phones are made in the Zhengzhou factory, which employs about 200,000 people, although it has other smaller production sites in India and southern China.

The industrial park’s notice did not specify how the measures might apply to Foxconn, but the move could affect the transportation of goods in and out of the complex.

Foxconn told Reuters in a statement that its campuses there continued to operate under a “closed-loop management” system, a reference to a bubble-like arrangement typically imposed as part of virus prevention measures in China, where employees sleep, live and work in isolation from the wider world.

Apple did not immediately respond to a request for comment.

Foxconn is working to retain staff and ease tensions at the plant, after workers complained about their treatment and provisions under COVID-19 prevention measures. Many employees also fled the plant, prompting Foxconn to offer generous employee retention bonuses. Read more

Market research firm TrendForce said it cut its forecast for fourth-quarter iPhone shipments by 2-3 million units, from 80 million previously, due to problems at the Zhengzhou plant, adding that its investigation into the situation found factory capacity utilization rates were now around 70%.

It was believed that Foxconn’s production of iPhone Pro and Pro Max models would continue exclusively at the Zhengzhou base in the short term, but Apple was planning to spread production-related risks by shifting orders to competing Luxshare makers. (002475.SZ) and Pegatron (4938.TW)She added.

Apple did not immediately respond to a request for comment on the TrendForce report, while Foxconn declined to comment.

Reuters reported earlier this week that plant production in November could fall by 30% due to the COVID situation and that Foxconn was working to ramp up production at another plant in Shenzhen. Read more

The park was also closed in late April for 14 days. Foxconn said at the time that its production at the plant was normal. Read more

(Reporting by Brenda Goh) Additional reporting by Yimo Lee and Sarah Wu in Taipei; Editing by Stephen Coates and Thomas Janowski

Our criteria: Thomson Reuters Trust Principles.

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