Chinese iPhone City Locks Down to Curb Foxconn Covid Crisis

Date: Thursday, November 3, 2022
Source: Wall Street Journal

HONG KONG—The Chinese industrial park where Foxconn Technology Group’s most advanced iPhone plant is battling a Covid-19 outbreak entered a weeklong lockdown Wednesday, after videos of workers fleeing from the site spread on social media.

Zhengzhou Airport Economy Zone in central Henan province said the lockdown would begin at noon on Nov. 2, banning all but essential movements in the 150-square mile park for 7 days to counteract the “severe and complicated” spread of Covid. During a visit to the park and Foxconn’s plant Tuesday, Henan Gov. Wang Kai said local officials in Zhengzhou, the provincial capital, must ensure Covid controls are strictly followed, and that conditions for workers improve.

Local authorities have sent hundreds of testing and sanitation workers to assist Foxconn, state media reported. Late Wednesday, the Henan government announced mandatory PCR testing for all staff on Thursday within the Zhengzhou zone.

The lockdown comes even though Foxconn imposed a bubblelike closed-loop arrangement at the Zhengzhou facility more than two weeks ago, restricting hundreds of thousands of workers at the world’s largest iPhone assembly site to their homes or sleeping quarters and designated areas of the factory. Many were confined to their dorms or bussed to quarantine facilities away from the plant, with some complaining of inadequate supplies of food and other essentials.

Other workers, scared of catching Covid, refused to return to the production lines, some escaping from the site.

Foxconn’s Zhengzhou factory is the first to assemble new and high-end iPhone models, ironing out any production wrinkles before they are introduced to other sites, according to Ivan Lam, a senior analyst at Counterpoint Research. At normal capacity, the plant would produce more than 80% of the iPhone 14 series and 85% of the iPhone 14 Pro series, he said.

In recent days, videos geo-tagged near the Foxconn site have shown groups of people walking along highways and through farm fields with their luggage. After those images went viral on social media, Foxconn said it would provide transportation to any workers wanting to go home. One worker who took a company-provided bus to a nearby town on Monday said he had to wait inside the vehicle for 12 hours to check into a designated quarantine facility because all of the rooms were full. Many others were stuck at the factory, he said, because there was nowhere to place them.

Foxconn has said that it employs as many as 300,000 people in its Zhengzhou factory. Workers said they have been in a constant state of anxiety during closed-loop management, not knowing who among them has Covid. Foxconn hasn’t disclosed how many workers have tested positive.

On Friday, the company added sweeteners to lure more people to its production lines. Those turning up every working day between Oct. 26 and Nov. 11 would receive free meals and a total of 1,500 yuan, equivalent to about $208, it said in a post addressed to employees on WeChat, a social media platform. Shortly after, the company quadrupled its daily incentive and extended it through November, with the potential payout reaching more than 15,000 yuan—about one-quarter of the average annual salary in the city.

The company also has plans to shift some production to other factories in China.

Counterpoint’s Mr. Lam said the Zhengzhou epidemic would likely have limited impact on iPhone production this quarter due to Foxconn’s ability to quickly transfer capacity, as well as its increased incentives for workers.

When asked about the significance of the lockdown, a Foxconn spokesman said only that it was continuing closed-loop operations. Apple didn’t immediately respond to a request for comment.

Henan reported 359 new locally transmitted Covid cases for Tuesday—all but one of which were in Zhengzhou—out of a nationwide tally of more than 2,600, according to official data. While Henan’s new daily infections have jumped more than 10-fold over the past week, they remain below those in southern Guangdong province, Foxconn’s China base and where it operates other factories assembling Apple products.

The troubles in Henan are just the latest illustration of the toll China is paying to maintain its zero-Covid strategy, which relies on swift and sweeping lockdowns, mass testing, compulsory quarantines and, in certain cases, business closures.

Zhengzhou, long a major transportation center in China, turned into a major logistics and air-cargo hub with the arrival of Foxconn in 2010. Foxconn shipped about $32 billion of products overseas from Zhengzhou in 2019, making its branch in the city the country’s largest exporter, according to the Statistics Association for Foreign Economic Relations and Trade of China, a government-backed think tank.

Zhengzhou’s Xinzheng International airport serves 48 airfreight routes that connect 26 countries across Asia, Europe and the U.S., according to state media. The Zhengzhou Airport Economy Zone is home to several other companies, including FedEx and Russia’s largest cargo airline AirBridgeCargo, according to the local government’s website.

On Wednesday, 97% of the scheduled flights to and from Zhengzhou had been canceled by 4 p.m. local time, according to Chinese travel monitoring service Flight Master. Only two flights left the city, the service showed.

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