Behind Foxconn’s China Troubles: Mistrust, Miscommunication, COVID Brakes

RockedBuzz
By RockedBuzz 6 Min Read
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By Yew Lun Tian, ​​Yimou Lee and Brenda Goh

SHANGHAI/TAIPEI (RockedBuzz via Reuters) – When officials in his Chinese village approached Hou last month urging him to work in the world’s largest iPhone factory for at least double the usual pay, he knew it was risky.

Tens of thousands of workers had fled the plant in central China in the previous weeks and violent protests had erupted over the COVID-19 lockdown and confusion over hiring bonuses.

Ma Hou, 24, who asked to be identified by last name only, told RockedBuzz via Reuters he had accepted the job at the Zhengzhou plant belonging to Foxconn, Apple’s biggest iPhone maker, which produces 70 percent of iPhones globally.

The crisis could cut November output at the factory by at least 30%, a Foxconn source told RockedBuzz via Reuters on Thursday, a development that has hit Apple’s stock price.

The Foxconn-owned, Taiwan-based plant battered by China’s tight COVID restrictions and facing critical demand for the year-end holidays offered attractive hiring bonuses and excellent pay.

Hou said he had been promised up to 30,000 yuan ($4,200) for just under four months of work — far above the 12,000-16,000 yuan Foxconn workers typically receive for four months.

But he said he didn’t negotiate a 10-day period in quarantine and the sudden notification that employees would have to work an extra month before receiving hiring bonuses.

Such complaints, Hou and two other workers told RockedBuzz via Reuters, prompted them to confront Foxconn management at the plant – essentially a city with more than 200,000 employees – leading to sporadic clashes that made headlines around the world.

In a rare example of large-scale labor unrest in China, Foxconn workers in COVID masks clashed with security personnel in white hazmat suits with plastic shields. Some protesters smashed surveillance cameras and windows with sticks.

In addition to the challenges of keeping factory lines operating under a closed-loop system enforced by Beijing’s zero-COVID policy – which requires workers to be isolated from the rest of the world – Foxconn’s turmoil has also exposed communication problems and a distrust among top management workers at Apple’s supplier.

“Nothing they said counted for anything,” Hou said from his hometown after accepting a 10,000 yuan settlement offered by Foxconn on Thursday to protesting workers who had agreed to leave.

Hou, who had worked in jobs such as sales and says he was told no factory experience was needed, never made it to the production line.

‘MY LIFE IS WORTH MORE’

Five other workers at the time said they were scared because Foxconn began moving COVID-positive people into a vacant housing project without disclosing infections and told workers to eat in their dormitories instead of company cafeterias, but then failed to separate workers infected by others.

Foxconn declined to comment on the claims of Hou and other workers, referring RockedBuzz via Reuters to past statements.

The company earlier apologized to workers for a pay-related “technical error” that occurred during hiring. He didn’t say why he was paying people to leave right away after promising them hiring bonuses.

In late October, after scenes of fleeing workers began to spread, Foxconn said it was bringing the situation under control and coordinating with other plants to ramp up production.

If the problems persist through December, it will cost Foxconn and Apple to produce about 10 million iPhones, equivalent to a 12% cut in iPhone shipments in the fourth quarter, KGI Securities analyst Christine Wang said.

Foxconn executives said the company found itself in a difficult position, having to expedite shipments during Apple’s biggest holiday season following strict local government COVID guidelines.

“It was the busiest time of the year,” a senior Foxconn official said, adding that an October COVID outbreak on the Zhengzhou campus caught the company off-guard and triggered “a mess.”

“There was pressure for everyone, even the local government,” the official said, referring to local authorities rushing to help recruit replacement workers.

What happened at the plant was “the epitome” of what companies face under China’s strict COVID policy, and will “push production lines out of China at a faster rate,” the official said.

Marina Zhang, an associate professor at the Australia-China Relations Institute at the University of Technology Sydney, said Foxconn’s woes have sent a message to companies trying to maintain Chinese operations and keep workers COVID-free online with national politics.

“A company’s internal communications can be totally overwhelmed, overwhelmed by social media,” said Zhang. “They lose power on social media: no one will listen to them.”

One worker, Fay, said he feared contracting COVID and was anxious about whether to stay for another two weeks to claim a bonus for completing his three-month contract. Eventually, she says, she crawled out of a hole in a green metal fence.

“In the end, I decided my life was worth more.”

(This story has been re-archived to correct the date to add Taipei)

(Reporting by Yew Lun Tian in Singapore, Yimou Lee in Taipei and Brenda Goh in Shanghai; Editing by Anne Marie Roantree and William Mallard)

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