Lockdown at a Foxconn factory reveals Apple’s dependence on China

China’s confinement of the area surrounding the world’s largest phone factory iPhonereveals the risks for the manufacturing industry of the “zero Covid” policy in the Asian giant, analysts told AFP.

The Economic Zone of the Airport of Zhengzhouwhere the factory of the Taiwanese technology giant Foxconn is located, began seven days of confinement on Wednesday, after cases of Covid-19 were detected

Hundreds of employees exasperated by their working conditions fled the factory, according to viral images released and testimonies collected by AFP.

Foxconn is China’s largest employer in the private sector, with nearly a million people working in its thirty factories and research centers.

But the Zhengzhou site is the “jewel in the crown” and it is here that iPhones are being mass-produced in numbers not seen anywhere else.

“Under normal conditions, almost all iPhone production is focused on Zhengzhou,” says Ivan Lam, an analyst at specialist firm Counterpoint.

Risk of strong dependency

Foxconn is the main subcontractor of the US giant Apple, which also has one of its largest markets in China.

“For Apple, is again a bad example in terms of stability in the production chain” says Alicia Garcia Herrero, head of the Asia-Pacific region for the Natixis bank.

Experts believe that the strong dependence of the Californian company on China “generates potential risks, especially when the trade war between the United States and China shows no signs of de-escalation” according to the consulting firm Dezan Shira & Associates.

Opened in 2010, the Zhengzhou factory employs up to 300,000 people, who live on or around the site, creating a sprawling technology hub known as “iPhone city.”

It is made up of three factories, one of which produces the iPhone 14, the new Apple model

Apple did not respond to AFP questions about how the lockdown is affecting its production.

Analyst Ivan Lam believes that the partial cessation of work at the site will generate a loss of “10 to 30%” of production, despite the fact that part of it has been temporarily transferred to other Foxconn factories in China.

According to Foxconn, the site is now operating in “closed circuit”, with workers forced to sleep in the factory to avoid any contact with the outside for health reasons.

For this reason “this incident should have a limited impact” on the production of the iPhone in the world, says analyst Ming-Chi Kuo, an Apple product specialist.

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China is the last major economy to maintain a strict strategy against covid

This zero Covid policy has generated quarantines as soon as some positive cases appeared, as well as company closures, which has weighed on supply chains.

To be less dependent on China, Apple has already decided to outsource part of its production to India, and sees the possibility of doing so in Vietnam as well.

Anti-Covid restrictions accelerate this trend. In 2020, at the start of the pandemic, the Zhengzhou site had already been locked down for a week.