Foxconn pumps money into another China plant

Foxconn Technology Group, Apple’s biggest contractor, has injected 1 billion yuan (US$142 million) in fresh capital into its facilities in northern China, as its iPhone factory in the central Chinese city of Zhengzhou – the largest in the world – struggles to meet production targets amid a severe manpower shortage.

The investment was made towards a Foxconn subsidiary in Taiyuan, capital of Shanxi province, according to a stock exchange filing on Friday. The province is listed by Apple as one of Foxconn’s primary locations for the manufacturing of Apple products in mainland China, along with six other provinces including Henan and Jiangsu.

The Taiyuan plant, established in the early 2000s, mainly produces electronic components, mobile communication systems, smartphones and digital cameras, public information shows.

Foxconn, formally known as Hon Hai Precision Industry, called the latest move a “long-term investment” without further elaborations.

It comes as the company scrambles to restore production capacity after its campus in Zhengzhou lost an estimated tens of thousands of workers who fled last month in fear of a Covid-19 outbreak. The sprawling compound, dubbed ‘iPhone City’, usually hires some 300,000 people this time of the year to cope with a surge in holiday orders.

A subsequent attempt to introduce new hires to the factory compound – which was responsible for producing 80 per cent of iPhone 14 and 85 per cent of iPhone 14 Pro, according to Counterpoint Research – led to violent protests over work allowances.

As a result of “the challenges at Zhengzhou” as well as softening consumer demand for entry-level iPhones, investment bank UBS this week slashed its forecast of iPhone 14 production by 16 million to 76 million units for the second half of this year.

Similarly, Kuo Ming-chi, an analyst covering Apple at TF International Securities, now expects Apple to ship 20 per cent fewer smartphones this holiday quarter than previously forecast.

In a bid to fill up its numerous vacancies, Foxconn is offering as much as 21,500 yuan of additional incentives over two months from December through January to returning workers who resigned as early as January 2018.

Despite repeated disruptions to its supply chains caused by China’s stringent Covid-19 control measures, Foxconn chairman Liu Young-way said in last month’s earnings call that the company planned to increase capital spending in 2023, with the largest portion going to mainland China.

Still, the company is taking measures to diversify its manufacturing footprint.

On Friday, Foxconn also announced US$58.98 million of investment into a subsidiary in the Czech Republic, where the company currently runs factories that produce screens, smartphones and cloud servers, as well as design, research and development centres, according to Taiwan’s official news agency CNA.

It followed US$300 million of investment in a new Apple plant in Vietnam in August. South China Morning Post