Unrest Over Covid Lockdowns Spread Following Protest Outside an iPhone Factory in China
Foxconn's logo at night outside of the company's building in Taipei, Taiwan. Photo: Ann Wang/Reuters
On Wednesday, Nov. 23, workers at Foxconn's central China Apple manufacturing line, the world's largest iPhone factory in Zhengzhou, China, protested over contract disputes and coronavirus lockdown under Beijing's continuing “zero-Covid policy,” which led to rising nationwide unrest.
The leading cause of the initial demonstration is Apple's supply chain issue under the post-pandemic, yet still highly restrictive, CCP's coronavirus control policy. The latest revolt traced its root back to last month when Foxconn's workers left the factory campus in central China amidst the increasing Covid infection in the mainland. The worker shortage quickly sabotaged Apple's already strained supply since the factory in Zhengzhou, the capital of the central province of Henan, is the world's largest iPhone manufacturer.
As a result, the management offered an increasing bonus for returning workers. However, protests soon broke out this Wednesday when the newly hired managers announced that there would be no bonus as promised. Protesters clashed with riot police and security guards while tearing down blockades.
One of the most directly impacted aspects of the Zhengzhou outbreak was the global tech supply chain and Apple's quarterly performance between Thanksgiving and Christmas. Foxconn, the company that owned the central China facility, is a Taiwanese contract manufacturing company that has been a top supplier to top tech companies, including Apple. Every week until the unrest ends, Apple will lose approximately $1 billion in iPhone sales, as estimated by a managing director of equity research at Wedbush Securities.
Combining the supply chain concern with rising seasonal demand during the Black Friday weekend, a significant shortage will likely happen and lead into the Christmas season. In fact, a Black Friday store check already shows iPhone shortages across the board. Roughly more than 10 percent of iPhone production is impacted by the Zhengzhou protest, which is a huge blow to investors' confidence and a glooming concern for Apple's following quarterly report.
However, an underlying theme is the domestic policy crisis in "the world's factory." China's latest rising Covid cases created workers' fear and the legitimacy for Xi Jinping to continue the zero-covid policy after re-election. As a result, Chinese citizens face the same, if not stricter, lockdown even as the rest of the world is returning to a pre-covid lifestyle. On Nov. 22, less than a week after canceling the negative Covid Test requirement for public transportation, Northern China locked down major cities once again due to surging infections.
China's strict Covid policy forced an Apple store to close in Shanghai earlier this year. Photo: Aly Song/Reuters
The unsatisfied citizens turn to social unrest to demonstrate their anger after the three-year-long lockdown life. Earlier this week, a fire hazard led to the death of 10 in a densely populated residential building under lockdown in Xinjiang. Protesters questioned the authority's decision to enforce a strict lockdown and shifted theory anger toward the unnecessary nature of the zero-covid policy. Similarly, in the southern city of Guangzhou, residents broke out of the lockdown zone during a heated argument between protesters and health workers regarding the lockdown and ransacked food provisions.
Despite the highly regulated nature of Chinese social media, there is also an increasing number of people posting their complaints and rage at the authorities, especially when the policy causes the death of innocent citizens. All events showed signs of continuing unrest, and the possibility of the Zhengzhou protest ending soon is low. This is a challenge for the tech manufacturers and a long-term political issue for Xi's presidency.
However, not everyone is a loser in this manufacturing crisis due to China's zero-Covid policy. The situation might pose an opportunity for other countries, such as India. While Apple is seeking to address the Zhengzhou factory's worker's concerns, it has also been diversifying the company's supply chain away.
Before the protest, Apple had already begun manufacturing the iPhone 14 in India, which will likely have to increase its production if the Zhengzhou unrest doesn't end in time. A report from The Wall Street Journal shows the firm was searching for alternatives to China for its manufacturing, such as Vietnam and India. The world's factory might give the title to other countries after decades of a dominant role in global supply chains.
The social unrest in China is undoubtedly a topic to pay close attention to in the foreseeable future, as it will determine the political stability in China, the country's role in the global economy, and the tech industry's survivability in recession.