Foxconn Unrest: Can China’s Loss Be India’s Gain?

If US tech companies like Apple find India as a manufacturing destination, it will not only secure foreign investment but also generate employment opportunities for India

The latest protests in China have come in the wake of widespread employee unrest at the iphone plant and it was an albatross for Apple.

Source : Getty

Hardly anyone can forget the dreadful situation of the global pandemic, especially the second wave of Covid-19. It became a threat to our lives, livelihoods and the economy. Though people have started returning to their daily routine, business Incs are coming forward and the economy is gaining momentum, Covid is still a threat for normal life as well as for economic activities. The first transmission of Covid-19 to humans was in Wuhan in early December 2019. Since then, the virus has mostly spread through person-to-person contact across the world.

Covid not only affected human lives, but also severely affected the global supply chains across the globe and derailed economic activities. It is still causing deaths, serious illnesses and changing life. In China, which was the epicentre of the pandemic, things have barely changed for the public, with strict pandemic rules still in place under its ‘zero-Covid’ policy. According to the World Health Organization, China has recorded 97.14 lakh crore coronavirus cases since the epidemic began, with 5,226 deaths being reported due to the infection.

China's administration is of the view that the uncontrolled Covid outbreaks would put many vulnerable people and the elderly at risk. The government is therefore following a dynamic zero-Covid policy to curb pandemics, save lives and livelihoods. The policy has led to factories and ports being shut for long periods. It has imposed the country’s longest curfews and barred 40 lakh residents from leaving their homes for up to 3-4 months. These restrictions have also been imposed on public movements in and out of the city amid surges in covid cases.

However, the lockdown measures are not working, as daily coronavirus cases indicate that the zero-Covid policy has largely failed. It is not only affecting work with foreign companies in the country, but also impacting businesses and consumers in the rest of the world as China is the major supplier of goods. China’s clinginess with a stringent zero-Covid containment policy nearly three years into the global pandemic is hurting investors expecting a quick re-opening of the world’s second biggest economy.

This is squeezing the economy and fuelling widespread frustrations. China’s strict restrictions have transformed the daily life of people, riled the economy and sparked a wave of worker protests. There is a surge in public frustrations with the policy and its high human cost has erupted into unprecedented demonstrations since last fortnight. The ongoing widespread protest against the stringent constraints is now drawing international attention.  

Labour Unrest At Biggest iPhone Factory In China

Foxconn has almost 2 lakh employees at its iPhone plant, the world’s biggest, in the central city of Zhengzhou, China. The plant has been swayed by workers' resentment over strict Covid measures within the site. The plant was scheduled for partial lockdown in order to curb the spread of Covid-19 infections. The city administration has suspended access to this industrial zone, which surrounds the iPhone factory. The latest protests have come in the wake of widespread employee unrest at the plant and it was an albatross for Apple.

Foxconn forbade all dining-in at mess and canteens and asked workers to take their meals to their dormitories. Many workers were complaining about the uncertainty of the situation and about not receiving sufficient food. Many have left the factory due to Covid fears, and thousands are demanding freedom from lockdowns. A video, rolling on Chinese social media, shows Foxconn workers loaded with luggage walking towards their hometowns.

To retain them, Foxconn has offered more bonuses. However, the newly hired workers said the management had reneged on their promises, according to a CNN report. The daily bonuses for workers were offered to increase from previously announced 100 yuan to 400 yuan a day for November, as per the WeChat account of Foxconn.

A Reuters report said those employees who have worked for more than 25 days can now get a maximum bonus of 5000 yuan from the earlier maximum of 1500 yuan. Subsequently, those who put in their full efforts and forwent any leave during the month of November would be paid a total of over 15,000 yuan for the month.

Foxconn’s iPhone Plant Crisis Could Cut iPhone Production

Apple’s global partner Foxconn’s plant in Zhengzhou produces 70 per cent of iPhones output shipments globally, albeit Apple also produces iPhones in South China and in India. A long lockdown at the Foxconn plant in Zhengzhou hit the production of iPhones that could lead to fears of a worldwide shortage. The ongoing protest in the city of Zhengzhou could slump iPhone production for November at the factory by as much as 30 per cent.

How will Apple manage the gap between much higher demand for mobile due to the Christmas and other festivals and the disrupted supply? It could cause major shortages as Foxconn has been struggling to produce iPhone-14 Pro and Pro Max at its factory for some time now. Almost 5 per cent iPhone-14 sales are likely off the table due to the current crisis. The factory was forced to shutter its big plant. According to the CNN report, the ongoing shutdown and unrest is costing roughly $1 billion a week to Apple in lost iPhone sales. Apple has warned that deliveries of its new iPhone-14 may be delayed because of the Covid measures restrictions imposed on the factory.  

Opportunity For India, A Lucrative Market For iPhones

Apple Inc is the world’s biggest iPhone producer, accounting for almost half of the global smartphone market’s revenues. It is, according to reports, the second brand of smartphones to be shipped the most after Samsung. Apple has been producing the vast majority of iPhones in China for over a decade. However, the ongoing protests and the rising hostilities between the US and China have forced the company to cut its reliance on China and look at alternative manufacturing locations.

This presents an opportunity for India to turn the country into a global iPhone manufacturing hub. India is the second largest iPhone market in the world. According to a report in The Ken, the demand for iPhones in India has doubled to 60 lakh phones in 2021 and is expected to cross 70 lakh in 2022. Ming-Chi Kuo, an analyst at TF international securities, writes on Twitter that Foxconn will accelerate the expansion of iPhone production capacity in India due to the Covid-19 lockdown at the Zhengzhou plant.

https://twitter.com/mingchikuo/status/1588517327402061824?s=20&t=zt31mpwrwj4IT8Jw2LaApA

According to an Outlook India report, Foxconn has already been manufacturing iPhones SE phones in India at its Sriperumbudur factory since 2017. It is also making other iPhone models including iPhone-12, iPhone-13 and now 5 per cent of global iPhone-14 production to diversify its supply chain away from China. It is expected to expand its manufacturing capacity to produce 25 per cent of all iPhones in India by 2025, the report said.   

It is expected that locally assembled iPhone-14 would boost Apple’s make-in-India plans. It will meet 85 per cent of the local demand for iPhone in 2022 against 10-15 per cent last year. India is expected to assemble 5-7 per cent of all iPhones shipping globally in the current year against 1.5 per cent in 2020. It is expected that Foxconn will increase iPhone production in India by 150 per cent by next year. The longer goal would be to ship 40-45 per cent of such iPhones, that is at 4 per cent now, from India.  

At a time when US tech giants are looking for alternatives to China, India could be a prospective destination. Foxconn has already announced plans to start iPhone-14 production in India under the production linked incentive (PLI) scheme. India is also rolling out sops for manufacturing firms to amplify their make-in-India dynamism. If the US tech companies move towards India, the country would not only secure foreign investment, it will also provide employment opportunities for the people at a time the unemployment rate is hitting its highest mark in three months and has surged to 8.1 per cent in the first week of December. 

Apart from this, when the industrial output of India, according to MoSPI, contracted annually by 4.3 per cent in the second quarter of the financial year 2022-23, it shows only 0.1 per cent growth in the first half of the current financial year from the previous year and it has become a challenge for India to put this sector on the growth trajectory. In such a situation, a project like an iPhone plant would be a booster for the manufacturing sector.

The author is the co-editor of ‘The Future of Indian Economy: Past Reforms and Challenges Ahead’ and teaches at Institute of Technology & Science, Ghaziabad.

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