One of Apple’s key iPhone suppliers is paying workers to quit and go home as it struggles to operate amid worker unrest and COVID lockdowns.
In a staff notice, Foxconn said it would offer newly-hired employees at its plant in Zhengzhou an 8,000 yuan ($1,100) bonus to resign immediately and an additional 2,000 yuan ($300) if they boarded a bus back to their hometown, reports the South China Morning Post. The bonus is more than a month’s wages for Foxconn workers, according to Bloomberg.
“Some employees are still concerned about the coronavirus and hope to quit and return home,” Foxconn wrote in its notice, saying it “deeply understands the concerns” of its workers.
Foxconn, which is officially known as Hon Hai Precision Industry, did not immediately respond to a request for comment.
The notice came hours after reports of violent protests in Foxconn’s Zhengzhou factory, which employs as many as 300,000 people. Workers left their dormitories early on Wednesday morning, angry about unpaid wages and concerned about the spread of COVID. Workers clashed with security personnel, and anti-riot police had to restore order.
Foxconn confirmed protests took place in a statement on Wednesday and denied that COVID-positive workers were staying in its dormitories.
COVID lockdowns
Zhengzhou officials announced on Wednesday that the city’s urban areas would be sent into lockdown from Friday through Nov. 29. The city—sometimes called “iPhone City” due to its key position in Apple’s supply chain—reported almost 1,000 cases on Wednesday.
Foxconn enacted COVID controls in late October, including forcing workers to eat in their dormitories, to quell a growing outbreak. Soon after Foxconn imposed these controls, videos emerged on Chinese social media of workers fleeing the factory, jumping fences and hitching rides on passing vehicles.
The worker exodus pushed Foxconn to turn to the government for help. Workers who fled Foxconn’s factory told the South China Morning Post that local village officials had called them on behalf of the company, encouraging them to return to work.
Apple warned earlier this month that iPhone production would be lower-than-expected going into the holiday season due to disruption in its factories. State media reported that Foxconn would need as many as 100,000 new workers to restore full operations.
China is battling COVID outbreaks across the country as cases rise to their highest point this year, exceeding the previous record set in April during Shanghai’s punishing two-month lockdown. The country reported 29,754 cases on Wednesday.
The widespread outbreaks are a new test of China’s “COVID-zero” policy, which uses mass testing and lockdowns to completely suppress outbreaks. These tough measures are blamed for dragging down China’s economy, with both retail sales and factory activity falling over the past month. Nomura economists estimate that areas responsible for one-fifth of China’s GDP are now under some form of lockdown.
Foxconn (2317. TW) said on Thursday a pay-related "technical error" occurred when hiring new recruits at a COVID-hit iPhone factory in China and apologized to workers after the company was rocked by fresh labor unrest.
Men smashed surveillance cameras and clashed with security personnel as hundreds of workers protested at the world's biggest iPhone plant in Zhengzhou city on Wednesday, in rare scenes of open dissent in China sparked by claims of overdue pay and frustration over severe COVID-19 restrictions.
Workers said in videos circulated on social media that they had been informed that the Apple Inc (AAPL.O) supplier intended to delay bonus payments. Some workers also complained they were forced to share dormitories with colleagues who had tested positive for COVID.
"Our team has been looking into the matter and discovered a technical error occurred during the onboarding process," Foxconn said in a statement, referring to the hiring of new workers.
"We apologize for an input error in the computer system and guarantee that the actual pay is the same as agreed and the official recruitment posters." It did not elaborate on the error.
The apology was an about-face from a day earlier when Foxconn said it had fulfilled its payment contracts.
The unrest comes at a time when China is logging record numbers of COVID-19 infections and grappling with more and more lockdowns that have fuelled frustration among citizens across the country. But it has also exposed communication problems and mistrust of Foxconn management among some staff.
The largest protests had died down and the company was communicating with employees engaged in smaller protests, a Foxconn source familiar with the matter told Reuters on Thursday.
The person said the company had reached "initial agreements" with employees to resolve the dispute and production at the plant was continuing.
Mounting worker discontent over COVID outbreaks, strict quarantine rules, and shortages of food had seen many employees flee the enclosed factory campus since October after management implemented a so-called closed-loop system that isolated the plant from the wider world.
Many new recruits had been hired to replace the workers who had fled - estimated by some former staff to number thousands.
The Taiwanese company said it would respect the wishes of new recruits who wanted to resign and leave the factory campus and would offer them "care subsidies". The Foxconn source said the subsidies amounted to 10,000 yuan ($1,400) per worker.
APPLE RISKS
Home to over 200,000 workers, Foxconn's Zhengzhou plant has dormitories, restaurants, basketball courts, and a football pitch across its sprawling roughly 1.4 million square meter facility.
The factory makes Apple devices including the iPhone 14 Pro and Pro Max and accounts for 70% of iPhone shipments globally.
Apple said it had staff at the factory and was "working closely with Foxconn to ensure their employees' concerns are addressed”.
Several shareholder activists told Reuters the protests showed the risks Apple faces through its reliance on manufacturing in China.
"The extreme dependence of Apple on China, both as a (consumer) market and as its place of primary manufacturing, we see that a very risky situation," said Christina O’Connell, a senior manager for SumOfUs, a nonprofit corporate accountability group.
Reuters reported last month that iPhone output at the Zhengzhou factory could slump by as much as 30% in November and that Foxconn aimed to resume full production there by the second half of the month.
The Foxconn source familiar with the matter said it was not immediately clear how much impact the worker protests might have on production for November and that it might take a few days to work that out, citing the large size of the factory.
A separate source has said the unrest had made it certain that they would not be able to resume full production by month-end.
Apple has warned it expects lower shipments of premium iPhone 14 models than previously anticipated.
