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Foxconn/Apple: China’s Covid failure bids goodbye to workers

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Workers at Apple’s biggest iPhone factory in China have a chance to receive the largest short-term payout in Foxconn history. Just weeks after the Taiwanese conglomerate offered bonuses for hiring workers, it’s offering them bonus to quit,

The phrase “rising labor costs” doesn’t begin to describe the challenges facing equipment manufacturers, contract manufacturers and their peers in the West and East.

Workers protesting the lockdown at Foxconn’s largest campus clashed violently with the police on Wednesday. His anger reflects widespread discontent over the government’s failure to eliminate the coronavirus in China, the world’s manufacturing hub.

Hon Hai – the name under which Foxconn is listed in Taiwan – is offering voluntary livers Rmb10,000 ($1,400). The so-called “care subsidy”, is worth more than a month’s normal full-time salary. The money is aimed at ousting employees unhappy with Foxconn’s need to stay on-site.

what next? Less hassle but less worker, definitely. The staff was already increased. Shortly after the protests began, Zhengzhou, the location of the iPhone factory, was closed for five days, disrupting hiring.

Apple has already warned that it will ship fewer devices in the current quarter. Analysts now estimate that iPhone production will drop by about a third in the short term as a result of the protests.

Contract manufacturing is a business with low profitability. Foxconn runs on razor-thin operating margins – less than 2.5 per cent last year. China’s labor cost has been rising rapidly for years.

Foxconn has had plenty of time to solve that problem by investing in automated device assembly. Instead, it has spent billions in capital-intensive industries such as chipmaking and electric cars. Apple, for its part, is heavily dependent on Foxconn and China.

The larger issue is that Beijing is caught in an embarrassing bind. Its locally developed Sinovac vaccine appears to be of moderate efficacy. But national pride hinders the widespread deployment of superior Western strikes.

China has underinvested, like Hon Hai. Less than one-tenth of the intensive care hospital beds available in the US as a percentage of the population. This has left Beijing to pursue a zero-covid policy through strict lockdowns.

That doesn’t change the medium-term case for investing in Apple or Hon Hai. Their steady cash flow has saved them from the worst tech selloff of the year. But the lockdown is expected to continue to hamper Chinese manufacturing for months to come.

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