Behind Foxconn’s woes in China: mistrust, miscommunication, COVID restrictions

SHANGHAI/TAIPEI, Nov 29 (Reuters) – When officials from his Chinese village approached Hu last month, urging him to work at the world’s largest iPhone factory for at least double the usual pay, he knew it was risky.

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

But Hu, 24, who asked to be identified only by his family name, told Reuters he took the job at the Zhengzhou factory owned by Foxconn ( 2317.TW ), Apple’s biggest iPhone maker, which produces the 70 % of iPhones worldwide.

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

The Taiwan-based Foxconn-owned factory, which has been hit by China’s strict COVID restrictions and is facing critical year-end holiday demand, offered enticing hiring bonuses and excellent pay.

Hu said he was promised up to 30,000 yuan ($4,200) for just under four months of work – well above the 12,000-16,000 yuan that Foxconn workers typically receive for four months.

But he said he had not bargained for a 10-day quarantine period and the sudden notice that workers would have to work an extra month before receiving their hiring bonuses.

Such grievances, Hu and two other workers told Reuters, prompted them to confront Foxconn management at the factory – effectively a city of more than 200,000 employees – leading to sporadic clashes that made global headlines.

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

In addition to the challenges of keeping factory lines running under a closed-loop system imposed under Beijing’s Zero COVID-19 policy — which requires workers to be isolated from the wider world — Foxconn’s turmoil has also exposed communication problems and mistrust among Apple’s top management employees. Supplier.

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

Hu, who had worked in jobs like sales and says he was told factory experience wasn’t necessary, never made it to the production line.

“MY LIFE IS WORTH MORE”

Five other workers said at the time they were afraid because Foxconn began moving those who tested positive for COVID-19 into a vacant housing project without disclosing the infections and told workers to eat in their dormitories instead of in company canteens, but then did not managed to separate the infected workers from the others. .

Foxconn declined to comment on the allegations by Hou and other workers, referring Reuters to earlier statements.

The company previously apologized to workers for a pay-related “technical error” it said occurred during hiring. He has not said why he was paying people to leave soon after promising them hiring bonuses.

In late October, after scenes of walkouts began, Foxconn said it had brought the situation under control and was coordinating with other factories to ramp up production.

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

Foxconn executives said the company found itself in a difficult position as it had to speed up shipments during Apple’s most important holiday season while following the local government’s strict COVID guidelines.

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

“There was pressure on everyone, including 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 are facing under China’s rigid COVID policy and will “push production lines out of China at a faster pace,” the official said.

Marina Zhang, an associate professor at the University of Technology Sydney’s Australia-China Relations Institute, said Foxconn’s woes sent a message to companies trying to keep Chinese operations going and keep workers free of COVID-19 in line with national policy .

“A company’s internal communications can be completely neutralized, overwhelmed by social media,” Zhang said. “They’re losing power on social media – no one’s going to listen to them.”

One worker, Fay, said he feared he would catch COVID and was worried about staying two more weeks to claim a bonus for completing his three-month contract. Eventually, he says, he crawled through a hole in a green metal fence.

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

(This story has been refiled 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

Our Standards: The Thomson Reuters Trust Principles.

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