New Delhi CNN Business — Foxconn, one of Apple’s biggest suppliers, is grappling with a major disruption at its largest iPhone assembly factory in China, as anxious workers flee the locked-down facility, according to videos on social media.
The Taiwanese company is racing to contain a Covid outbreak at its campus in the central Chinese city of Zhengzhou. On Wednesday, authorities imposed a seven-day lockdown of the area that houses the Foxconn plant, an order that could affect the iPhone maker’s production and shipments.
The lockdown and exodus is putting Foxconn under enormous pressure just before the key holiday shopping season begins and highlights how the country’s strict zero-Covid policy is hurting international business.
“[We] fully understands your desire to return home,” Foxconn told its employees over the weekend, according to a post on the Zhengzhou government’s official WeChat account.
“For employees who voluntarily stay in the area of the company’s factory, the port government and the company will jointly guarantee the… health and safety of everyone,” he added.
Analysts said the chaos in Zhengzhou could jeopardize production at Apple and Foxconn in the coming weeks. Ivan Lam, senior research analyst at Counterpoint, estimated that between 10% and 30% of iPhone 14 production could be affected in the short term if the situation does not stabilize.
The Zhengzhou campus is the world’s largest iPhone factory and typically accounts for up to 85% of iPhone assembly capacity, according to Lam’s estimates.
A Foxconn spokesman told Chinese state media that the company is trying to increase production at other sites.
“Currently, because now is the peak production season… [there is] a high demand for workers,” a Foxconn spokesman told Henan Daily on Monday, adding that the company was “also coordinating backup production capacity at other sites.”
Foxconn and Apple did not respond to a request for comment from CNN.
Shares of Foxconn, also known as Hon Hai Precision Industry, fell 2.6 percent on Tuesday.
Videos of many people leaving Zhengzhou on foot have gone viral on Chinese social media in recent days. The city, which has a population of more than 12 million, imposed wide-ranging lockdown measures early last month after dozens of Covid-19 cases were identified.
State media said many Foxconn workers are among those walking miles to escape the city. Calling it “a helpless move for some employees,” a Foxconn director told Yicai media that workers are scared by the spread of the virus at the factory and lack of access to official information.
Foxconn said it was arranging vehicles for employees wishing to return home, according to a post on the Zhengzhou government’s official WeChat account over the weekend.
The company also quadrupled daily bonuses for workers at the plant this month, it said in a post on its official WeChat account on Tuesday.
While these disruptions will affect iPhone production in the short term, analysts say it may not affect Apple’s iPhone shipments in the key holiday season.
“I think in a week or two, things will be back to normal, given the current state,” Lam said.
“They still have a lot of alternative production sites,” he said, adding that Foxconn had already started moving production to other facilities in China, such as in the southern province of Guangdong. “Now things are under control.”
And, as Beijing shows little sign of moving away from its rigid Covid policies, Apple has begun to push production in other countries, including India, to reduce its reliance on China.