Apple Faces Major Tiff With Chinese iPhone Factory

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Source: EyePress News/Reuters

A violent workers’ revolt at the world’s largest iPhone factory this week in central China is further scrambling Apple’s strained supply and highlighting how the country’s stringent zero-Covid policy is hurting global technology firms, reports CNN.

The troubles started last month when workers left the factory campus in Zhengzhou, the capital of the central province of Henan, due to Covid fears. Short on staff, bonuses were offered to workers to return.

But protests broke out this week when the newly hired staff said management had reneged on their promises. The workers, who clashed with security officers wearing hazmat suits, were eventually offered cash to quit and leave.

“Gut punch” to Apple

Analysts said the woes facing Taiwan contract manufacturing firm Foxconn, a top Apple supplier which owns the facility, will also speed up the pace of diversification away from China to countries like India.

Daniel Ives, managing director of equity research at Wedbush Securities, told CNN Business that the ongoing production shutdown in Foxconn’s sprawling campus in the central Chinese city of Zhengzhou was an “albatross” for Apple.

Every week of this shutdown and unrest we estimate is costing Apple roughly $1 billion a week in lost iPhone sales. Now roughly 5% of iPhone 14 sales are likely off the table due to these brutal shutdowns in China,” he said.

Demand for iPhone 14 units during the Black Friday holiday weekend was much higher than supply and could cause major shortages leading into Christmas, Ives said, adding that the disruptions at Foxconn, which started in October, have been a major “gut punch” to Apple this quarter.

In a note Friday, Ives said Black Friday store checks show major iPhone shortages across the board.

Based on our analysis, we believe iPhone 14 Pro shortages have gotten much worse over the last week with very low inventories,” he wrote. “We believe many Apple Stores now have iPhone 14 Pro shortages … of up to 25%-30% below normal heading into a typical December.”

Ming-Chi Kuo, an analyst at TF International Securities, wrote on Twitter that more than 10% of global iPhone production capacity was affected by the situation at the Zhengzhou campus.

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Source: CNN

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