Local protests leading to a decline in production
Towards the end of 2022, we saw mass protests in China, and most of us believed they were caused by the same reason – the Zero-Covid policy. Although mostly true, there’s much more to it.
From November onward, workers at Foxconn, the world’s largest iPhone assembly factory, have been protesting due to the extreme conditions they live and work in.
Although local, these protests were expected to cause a decline in production of up to 6 million smartphones by the end of the year.
And indeed, data from February 2023 shows that Apple has the worst financial results in years. According to Reuters:
- iPhone sales have fallen worldwide for the first time since 2020;
- Apple sales from each product category fell 5% to $117.2 bn;
- For the first time since 2016, Apple’s profits didn’t meet Wall Street expectations.
The officials agreed that the overall decline could be credited to “production disruptions” or, more precisely, protests following Covid lockdowns in the Zhengzhou production facility.
Apple, for which Foxconn manufactures a range of products, told CNN Business that its employees were on the ground at the Zhengzhou facility. “We are reviewing the situation and working closely with Foxconn to ensure their employees’ concerns are addressed,” it said in a statement.
However, they claim that the “production is now where we want it to be”.
But what took them to get there?
Let’s take a closer look at Foxconn.
Inside Foxconn’s walls
On the 31st of January, an international nonprofit journalism organization Rest of World published a first-hand insight into so-called China’s iPhone City.
They covered a story of a Foxconn worker who goes by the name Hunter, and whose job was to attach a cable that charges the battery and join it to the case, using two screws. He has to complete this task each minute.
So, for a usual ten-hour shift, he had to assemble 600 iPhone 14 Pro on a daily basis.
During this shift, Hunter had a strict one-hour break and for each additional minute he used to go to, let’s say, the bathroom – he’d had to compensate. Needless to say, workshop spaces were windowless, smelled of chlorine and the workers were constantly monitored by the so-called xianzhang, or “line leaders”, who would admonish them whenever they noticed a lack in progress on their computers.
As a matter of fact, managers required such a tempo that workers felt as if they couldn’t stop for a second. According to Hunter, one of his colleagues had his pay reduced because he was “spending too much time drinking water.”
They usually had to run to the bathroom, and would get scolded if they didn’t return as soon as possible, making the working environment even more humiliating.
He said the experience left him with the impression that making iPhones is like “working under a whip” — made bearable, he and other workers acknowledged, by the generous pay.
Source: Rest of World
Why does this concern you, you may ask?
Because half of all iPhones in the world are made in this exact factory, and that’s why Foxconn is popularly known as “iPhone City”. As a matter of fact, your iPhone could’ve been in Hunter’s hands at some point.
At an area of only 5.6 square kilometers, it employs around 200,000 people.
Apple relies on just-in-time manufacturing, meaning it doesn’t build up a large inventory of products but has iPhones made as consumers order them (...) Workers, including rural migrants and college students, take on heavy workloads, skip holidays, and follow a tight schedule in order to qualify for their bonus at the end of the month.
Source: Rest of World
The “generous pay” that Hunter mentioned before is $324 on average, which is barely enough to cover rent and food costs. That’s another reason why workers are encouraged to work overtime or during holidays, so that they would earn bonuses.
But the real problem occurred with the new Covid lockdown policy, when workers’ dissatisfaction peaked and spilled over into the streets.
Crisis that cost Apple $1 bn per week
Chinese manufacturing workers are vastly living on a precarious, gig-like basis for decades now. But this problem only came to attention because such a major player as Apple has been involved in it.
As it turns out, Apple’s reputation – and profits – are at high stake because of this crisis. Apparently, during protests, Apple was losing $1 bn per week, according to tech analyst Dan Ives, as cited in the aforementioned article.
Prior to the escalation, both Apple and Foxconn could’ve predicted the Covid setbacks to some extent, and that’s why in 2022 the recruitment started earlier than usual. According to Foxconn’s promotional poster, workers were promised 10,000 yuan ($1,474) and bonuses if they joined and stayed for 90 days.
Keep in mind that China’s Zero-Covid policy meant that entire cities and factories would shut down to extinguish small outbreaks. If a worker was to get infected, he would be sent to quarantine for weeks and his salary would be cut-off for the time.
This Taiwanese manufacturing giant is known to have a history of suicides at its plant, to which they responded by cutting overtime work, hiring counselors, and, believe it or not, installing anti-jump nets between dormitory buildings and factory facilities.
In the midst of iPhone 14 Pro production, there was a Covid-19 outbreak inside Zhengzhou’s Foxconn. With quarantine facilities being full, infected and exposed workers had to isolate themselves inside unfinished buildings.
Not only that, workers had to comply with the “closed-loop” system, meaning that they couldn’t leave the compound. Consequently, workers climbing over the fence and leaving in a rush for their villages wasn’t a rare sight.
Hunter was among those who lived outside of the factory complex, in a rented room. This group of workers was obliged to move into the dormitory or quit their jobs. He chose the latter, as well as many of his colleagues.
So, to fill in for the fleeing workers’ positions, Foxconn started an aggressive recruitment campaign, offering up to $1,474 monthly to those willing to work 10 hours a day, six days per week. But when they did onboard new people, their contracts stated otherwise, which led to even more dissatisfaction.
In their defense, Foxconn blamed this discrepancy on a technical error.
All of these events resulted in thousands of recruits breaking out of their quarantine and marching on the streets, with wooden sticks and metal poles, in a direct clash with the police, while also smashing Foxconn’s offices.
In an attempt to quell the protests, Foxconn offered the workers payouts of 10,000 yuan ($1,474) if they chose to leave the next day. Reuters reported that some 20,000 recruits left. Partly as a result, the factory was operating at only 20% of its capacity in November.
Source: Rest of World
Knowing that this manufacturing giant operates all around the country, especially when joined by the global tech giant, this scenario is likely to repeat itself as if nothing happened.
Try and think about that the next time you look at your shiny device.