Dark Days Over For Foxconn?
Foxconn’s Zhengzhou plant is back at 90% capacity providing a big relief to Apple. The plant that saw massive protests by the workers over brutal living conditions and a strict zero-Covid policy is now boasting of having 200,000 workers.
Foxconn’s success in getting the workers to work for the company despite the re-emergence of a new aggressive strain of the virus is good news for Apple which has been suffering from production issues in China for quite a few months.
According to historical data, the Zhengzhou plant normally works with a staffing level of around 200,000. The plant seems to have reached this figure now and is thus operating optimally.
Apple’s Unusual Press Release In November 2022
Apple, in November last year, issued a grim press release that highlighted the issues at its Zhengzhou plant. According to the press release, production in the plant had been happening at a “significantly reduced capacity.” It warned that the shipment of iPhone 14 Pro and Pro Max would suffer in the event of a prolonged capacity issue.
The press release resulted in a selling frenzy in the stock market. The stock fell sharply after the announcement following a recalibration of the revenue forecast for Apple by analysts.
The Closed-Loop System: The Root of the Trouble
So, what exactly happened that led to the reduction in capacity in the first place? Last year, around October, when Covid-19 cases jumped to more than 350 in Zhengzhou, the local government ordered a strict lockdown of the city.
Foxconn, to continue production, introduced a closed-loop system that mandated workers to stay inside the campus of the manufacturing plant for an indefinite period. In fact, their movement within the campus was restricted as well.
This closed-loop system severely impacted the mental well-being of the workers. The situation became worse when Covid-19 broke out on the campus itself. Some workers alleged that even healthy people had to share rooms with the infected ones.
Workers started breaking out of the prison-style closed-loop system in the Foxconn plant. And then, in the last week of November Foxconn committed a pay-related “error” that made new employees think that they would not be getting a promised subsidy. This resulted in another mass exodus of more than 20,000 new workers.
The protest took an aggressive turn and Foxconn had to promise workers that it would pay 10,000 Yuan just to leave the campus peacefully.
Foxconn Stock Took a Bad Hit
During the chaotic moments in October and November, the stock of the largest supplier of Apple took a bad hit. In the month of January last year, the stock was hovering around 60. And then it fell steeply to the low of 45.50 in October. It’s slowly rising again. At the time of publishing this article, the stock was hovering around 51.30 TWD.
Lunar New Year Around The Corner: Something To Worry About
Although the situation in Foxconn’s Zhengzhou plant is almost stable now, the Lunar New Year holiday is around the corner. This will trigger a massive shopping frenzy in the entire country. Foxconn officials are thus cautious in celebrating this achievement of stability. There is a high probability of a spike in Covid cases a few days after the holiday which can result in another session of restrictions or lockdown.