iPhone Supply Bounces Back, Sketchy Rumors About iPhone 14 Plus, Amazon's Growing Layoffs (Daily Update)
We kick things off with a look at the latest production news from Foxconn’s “iPhone City.” The discussion then turns to iPhone 14 Plus rumors regarding weak sales and Apple management being “seriously” concerned. The update concludes with Neil’s thoughts on Amazon dramatically raising the number of announced layoffs in its corporate ranks.
Hello everyone. We will jump right into today's update.
iPhone Supply Bounces Back
Here’s Fox Business:
“The world's largest iPhone factory has reportedly been brought back to 90% capacity months after workers in China had shut down the plant over the government's COVID-19 restrictions.
Foxconn Technology Group claims it is operating the factory with approximately 200,000 workers in the central Chinese of Zhengzhou, according to a report from Henan Daily, a Chinese state media outlet. The group is Apple Inc.'s largest production partner for their featured smartphone.
In October 2022, Zhengzhou, also known as iPhone City, came to a standstill after thousands of workers stalled production due to the government's strict zero-COVID policies. The protests disrupted supply chains and cost Apple billions over the last few months.
‘At the moment, the order books look good, and the orders will peak from now until a few months after Chinese New Year,’ said Wang Xue, the deputy general manager of the factory, in an interview with the Chinese outlet.”
If the reporting is true, Foxconn’s iPhone City reaching 90% production capacity at quarter end would be a very positive development for an iPhone business that just went through a tumultuous two-month stretch.
A direct implication found with Foxconn’s primary iPhone facilities operating again at near full capacity, as of the end of December, is
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Additional Details on “iPhone City” Production, The WSJ Article on Apple Moving Out of China, Apple and Concentration Risk, Above Avalon Gifts 2022 (Daily Update)
We kick off today’s update with additional details regarding how iPhone production at Foxconn’s facilities at Zhengzhou is trending. The discussion goes over further refinement in Neil’s estimates/assumptions for the shortage in iPhone sales in FY1Q23 arising from the Zhengzhou protests/riots. The update concludes with a look at the WSJ’s article about iPhone production in China. After going over why the WSJ’s headline is misleading, we discuss Apple’s product assembly strategy.
Hello everyone. Welcome to a new week.
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Let’s jump into today’s update.
Additional Details on “iPhone City” Production
In an article published late Sunday, here’s Reuters:
“Apple supplier Foxconn expects its COVID-hit Zhengzhou plant in China to resume full production around late December to early January, a Foxconn source said on Monday, after worker unrest last month disrupted the world's biggest iPhone factory.
The Zhengzhou plant has been grappling with strict COVID-19 restrictions that have fuelled discontent among workers over conditions at the factory. Production of the Apple device was disrupted ahead of Christmas and January's Lunar New Year holidays, with many workers either having to isolate to combat the spread of the virus or fleeing the plant.
Following the November unrest, that saw workers clash with security personnel, Foxconn could have seen more than 30% of the Zhengzhou site's November production affected, Reuters reported last month citing a source familiar with the matter. Foxconn hasn't disclosed details of the impact of the disruption on its production plans or finances.
‘The capacity is now being gradually resumed’ with new staff hiring under way, said the person with direct knowledge of the matter. The person declined to the named as the information was private.
‘If the recruitment goes smoothly, it could take around three to four weeks to resume full production,’ the person said, pointing to a period around late December to early January.”
Given Foxconn’s recent attempts at spinning negative news, we need to approach this latest reporting with some skepticism. Foxconn has reason to downplay the potential production impact at Zhengzhou resulting from weeks of employee unrest.
With that said, the Reuters report didn’t come across to me as overly positive. Instead, Reuters’ Foxconn source pointed to full production at Zhengzhou still being a ways off.
Last week, we assumed “Apple loses three weeks of Zhengzhou production [in November], followed by four to five weeks of reduced production.” Based on Reuters’ newest article and having more time to dive a bit more into the granular details, we can refine that assumption into:
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The Foxconn Protests in China, Impact on Apple, COVID Protests Worsen in China (Daily Update)
Hello everyone. Today’s update will examine the Foxconn/COVID protests in China. Let’s jump right in.
The Foxconn Protests in China
In an article published on November 24th, here’s CBS News:
“Foxconn, the electronics manufacturing company that assembles Apple's iPhones, apologized Thursday for the pay dispute that triggered massive employee protests, and violent police pushback, at a factory in central China where anti-virus controls slowed production.
Mounting unrest at the Zhengzhou factory has persisted for at least a month, since thousands of employees staged a walkout in October over what they said were unsafe working conditions linked to the spread of COVID-19. All of this comes as China grapples with a spike in virus infections, seen especially in highly populated cities.
Foxconn hired a slate of new employees following the exodus. Accusations that the company unlawfully altered its policies for incoming workers, who say they were hired with the promise of higher pay than they are actually receiving, led to protests at the factory.
Videos shared on social media earlier this week appeared to show one particularly large demonstration involving thousands of people in Zhengzhou, wearing masks and facing rows of police officers wearing protective suits and holding riot shields. Police kicked and hit a protester with clubs after the person grabbed hold of a metal pole that was being used to strike him. Witnesses also said that employees at the iPhone factory were beaten and detained amid the protests.”
Zhengzhou is nicknamed “iPhone City” as it’s the largest hub of iPhone production in the world. Estimates peg Foxconn’s facilities in the region at being responsible for 50% of iPhone production.
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