Labor woes hit Apple suppliers

By GT staff reporters Source:Global Times Published: 2020/3/3 21:28:40

Foxconn raises incentives but still has gap of 22%

A view of the R&D center of Foxconn Zhengzhou Science Park on Wednesday Photo: Wang Yi/GT

Apple's major suppliers in China including Foxconn, Flex and Changshuo are scrambling to recruit workers as they resume production amid the coronavirus outbreak. 

Yet all of them are overwhelmed by acute labor shortages and suffering from dwindling output capacity, with some plants seeing a gap as large as 22 percent of the workforce. 

The disrupted Chinese supply chain will probably cause a decline of 50 percent year-on-year in Apple's revenue in China in the first quarter, and up to a 10 percent loss on a global scale, an industry insider predicted.

In Foxconn's factory in Zhengzhou, Central China's Henan Province, also the world's largest iPhone factory, there is a gap of 50,000 workers, or 22 percent of the plant's capacity, a human resources manager surnamed Wang told the Global Times. 

"Hiring workers is underway but now it isn't easy to get qualified people" because of the epidemic, Wang said, adding that the process during the epidemic has become troublesome since each of the employees needs a health certificate, which may take time amid the outbreak.

Foxconn managed to reopen its Zhengzhou plant as the virus is gradually coming under control in China, although the reopening was more than half a month later than the originally planned on February 3, the Global Times learned from the company's WeChat account. 

While resuming work is one thing, running the production line at full capacity is another. Employment is now the biggest headache for the manufacturer, as some workers are trapped in their hometowns due to transport restrictions, while others returning from other provinces are required to be quarantined for certain periods. 

A worker at the Zhengzhou plant, who asked not to be identified, confirmed to the Global Times on Tuesday that the production line cannot be fully restored since many migrant workers have not been able to return.

Foxconn has increased its efforts to attract more employees. In an online recruitment post on February 20, it said workers who successfully join the Zhengzhou factory will be rewarded with 5,250 yuan ($752) for the first three months. In a previous post on February 6, the bonus was 3,000 yuan.

According to a post seen by the Global Times on the WeChat account of a Shenzhen-based recruiter, the average salary for new workers at Foxconn's Shenzhen factory is elevating to 29 yuan per hour, which is "very attractive" compared with previous payment. 

Foxconn had not responded to an interview request by the Global Times as of press time.

Across the country, challenges in recruiting workers are not only haunting Foxconn but also Apple's other major suppliers, seriously stretching the company's supply chain. 

At Shanghai's Changshuo factory, which accounts for 40 percent of iPhone output, only 10,000 workers, or 25 percent of the workforce it employed in the second half of 2019, are now working on the production line, news website reported.

Flex has also launched a reward program for returning workers. Chinese workers could receive bonuses of 500 to 2,000 yuan, depending on the time they returned. 

But a Chinese worker at Flex told the Global Times there are still "a number of empty beds" in his dormitory.

Industry insiders noted that Apple's profitability largely hinges on its vast network of Chinese suppliers, and whether those companies will be able to recruit enough new workers to return to normal production. 

Although Apple has set up plants in India and Vietnam, most of its production is still in China, according to a Wall Street Journal report.

Liang Zhenpeng, a Beijing-based industry expert, told the Global Times that even if Foxconn is able to fully resume production, Apple's production line may not return to normal in a short time.  

"Foxconn assembles devices, but there are many small and medium-sized factories that help make parts, so ultimately, the coronavirus outbreak has impacted Apple's supply chain," Liang said. 

He estimated that the disruption will drag down Apple's first-quarter revenue by half in the Chinese market and 10 percent in the global market. 

"Apple also sources a bulk of display panels from South Korea's Samsung, that's another blow to the company as South Korea is seeing a surge in confirmed coronavirus cases," Sun Yanbiao, head of Shenzhen-based research firm N1mobile, told the Global Times on Tuesday.

But as China is making a top-down effort to help Chinese and foreign companies stabilize production amid the outbreak, it is likely that Apple's production will return to normal by the end of May or in early June, Sun said.

"Chinese manufacturers have an incomparable edge in flexibility and repairing ability," Sun added.  

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