Apple Reportedly Faces Shortfall Of 6 Million iPhones Amid China Factory Protests

Forbes
Published 2 months ago
Apple’s iPhone 14 Series On Sale In China

TOPLINE

Apple may fall short of its production target for its flagship iPhone 14 Pro models by nearly 6 million units worldwide, Bloomberg reported Monday, after workers at the world’s largest iPhone manufacturing plant in Zhengzhou, China, protested delayed bonus payments, poor living conditions caused by China’s stringent Covid restrictions.

KEY FACTS

According to Bloomberg, the exact size of the shortfall still remains unclear and will likely depend on manufacturer Foxconn’s ability to hire enough workers for the iPhone assembly line to keep up with production targets.

Earlier this month, Apple had cut its production target for the iPhone 14 by 3 million units due to Covid-related disruptions at the Foxconn plant and that number has now been revised by double, the report adds.

Workers at the Foxconn plant in Zhengzhou—sometimes referred to as “iPhone city”—have been forced to live on-site in a closed bubble, only being allowed to move from the factory floor to their dorm rooms due to the city’s Covid control measures.

While sales of the cheaper iPhone 14 and 14 Plus have slowed down, the pricier iPhone 14 Pro and Pro Max have continued to remain in strong demand in the U.S., the report adds.

While the company has diversified its manufacturing line by making some of its devices in India and Vietnam, nearly all of its flagship iPhone 14 Pro models are made in the Zhengzhou factory.

Apple’s shares were down 1.87% in pre-market trading on Monday morning following the report.

Forbes has reached out to Apple for a comment.

BIG NUMBER

90 million. That was Apple’s initial target for the total number of iPhone 14 series devices that Apple planned to manufacture this year, Bloomberg previously reported.

CRUCIAL QUOTE

In an analyst note, investment firm Wedbush Securities said: “We estimate that Apple now has significant iPhone shortages that could take off roughly at least 5% of units in the quarter and potentially up to 10% depending on the next few weeks in China around Foxconn production and protests” The note added, “The zero China Covid policy has been an absolute gut punch to Apple’s supply chain with the Foxconn protests in Zhengzhou a black eye for both Apple and Foxconn.”

NEWS PEG

Anticipating a disruption due to China’s anti-Covid measures, Apple issued a statement earlier this month warning of a delay in shipments for the Pro model iPhones. The statement blamed “Covid-19 restrictions” for impacting production at the Foxconn plant and said customers trying to purchase the top-end models will face longer wait times. At present on Apple’s website, the wait time for an iPhone 14 Pro or Pro Max shows up as exactly one month. The cheaper iPhone 14 and 14 Plus are available for same-day pickup at most Apple stores.

KEY BACKGROUND

Last week, violent clashes broke out between security personnel and workers at the Foxconn plant over delayed payments and poor living conditions. Several workers said they feared they would not receive their promised bonus payouts for joining the factory unless they stayed until March. The new recruits had been lured by promises of higher wages and a bonus payment after hundreds of workers fled the factory campus in October, fearing the impact of stringent Covid measures. Foxconn eventually apologized and blamed the problems on a “technical error” in its hiring process. In an effort to assuage angry recruits, the company offered a ¥10,000 ($1,400) compensation to those who wanted to leave the plant. According to Reuters, nearly 20,000 recruits took up Foxconn’s offer, nearly 10% of iPhone City’s 200,000-strong workforce.

FURTHER READING

Apple to Lose 6 Million iPhone Pros From Tumult at China Plant(Bloomberg)

By Siladitya Ray, Forbes Staff