iPhone factory lockdown shows risks of China dependence, analysts say | Tech News

iPhone factory lockdown shows risks of China dependence, analysts say

Foxconn, Apple's principal subcontractor, has seen a surge in Covid-19 cases at its Zhengzhou site.

By:AFP
| Updated on: Nov 04 2022, 01:06 IST
iPhone 15 Pro to get iPhone SE 3, iPhone 8 type specs! Amazing Apple move
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1/5 Are you waiting eagerly to get some exciting insights into the Apple iPhone 15 specs? Though there is still a year's time for the new iPhones' launch (expected in September, 2023), the leaks and rumors about it are creating a buzz amongst the fans. And as per the latest update, it is being said that the volume button and the power button of the two high end iPhone 15 models, iPhone 15 Pro and iPhone 15 Pro Max, may adopt a solid state button design similar to the home button design of iPhone 7, iPhone 8, iPhone SE 2 and iPhone SE 3. (REUTERS)
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2/5 The information has been provided by Ming-Chi Kuo, analyst at TF International Securities over his Twitter handle. "My latest survey indicates that the volume button and power button of two high-end iPhone 15/2H23 new iPhone models may adopt a solid-state button design (similar to the home button design of iPhone 7/8/SE2 & 3) to replace the physical/mechanical button design," he tweeted. (HT Tech)
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3/5 In a series of tweets, the analyst further informed that there will be Taptic Engines located on the internal left and right sides to provide force feedback to make users feel like they are pressing physical buttons. He went on to say that due to this design change, the number of Taptic Engines used in each iPhone will increase from the current one to three. As a result, the existing Taptic Engine suppliers, Luxshare ICT (1st supplier) and AAC Technologies (2nd supplier) will be significant beneficiaries. (AFP)
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4/5 Also, it is expected that high-end Android smartphones will also follow Apple's design to create new selling points, which is a structural positive for the mobile phone vibrator industry, the analyst added. (AFP)
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5/5 Analyst Kuo had earlier said that Apple is expected to create massive differentiation between iPhone 15 Pros and iPhone 15 standard models. "I believe Apple will create more differentiation between iPhone 15 Pros and iPhone 15 standard models to increase Pro shipment allocation and the new iPhone ASP (average selling price)," his tweet read. Kuo said that Apple may create differentiation between the iPhone 15 Pro Max and the iPhone 15 Pro models in order to generate more sales and profits in a mature market. (HT Tech)
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Foxconn is China's biggest private sector employer, with over a million people working across the country in its around thirty factories and research institutes. (REUTERS)

The lockdown of Foxconn's Zhengzhou factory, the world's biggest producer of iPhones, has highlighted some of the risks of relying on zero-Covid China's manufacturing sector, analysts told AFP.

Foxconn, Apple's principal subcontractor, has seen a surge in Covid-19 cases at its Zhengzhou site, leading the company to lock down the vast complex in a bid to keep the virus in check.

Images then emerged of panicking workers fleeing the site on foot in the wake of allegations of poor conditions at the facility, which employs hundreds of thousands of workers.

Foxconn is China's biggest private sector employer, with over a million people working across the country in its around thirty factories and research institutes.

But Zhengzhou is the Taiwanese giant's crown jewel, churning out iPhones in quantities not seen anywhere else.

"In a normal situation, almost all the iPhone production is happening in Zhengzhou," said Ivan Lam, an analyst with specialist firm Counterpoint.

Risk of 'strong dependence' 

Apple manufactures more than 90 percent of its products in China, which is also one of its most important markets.

"For Apple, it is once again a bad example in terms of the stability of production chains," Alicia Garcia Herrero, Asia-Pacific manager for Natixis bank, told AFP.

Experts say the company's heavy dependence on China "brings potential risks, especially when the US-China trade war shows no signs of de-escalating," according to Dezan Shira & Associates, a consulting firm.

Opened in 2010, the Zhengzhou factory employs up to 300,000 people who live on-site all year round -- creating a sprawling tech hub known as "iPhone city".

It is made up of three factories, one of which produces the iPhone 14 -- Apple's newest handset model.

Apple did not respond to AFP's request for comment on how exactly the lockdown will affect its production.

Analyst Lam estimates the partial stopping of work at the site resulted in a loss of "10 to 30 percent" of output, but said part of the production has also been temporarily moved to other Foxconn sites in China.

According to Foxconn, the site is currently operating a "closed loop" with the workers avoiding all contact with the outside world, while their daily bonuses have been quadrupled.

"This incident may have a limited impact," on worldwide iPhone production, estimated analyst Ming-Chi Kuo, who specialises in Apple products.

"But suppliers in China must learn to improve closed-loop production efficiency in response to the zero-Covid policy," he added.

Looking elsewhere 

China is the last major economy committed to a zero-Covid strategy, persisting with snap lockdowns, mass testing and lengthy quarantines in a bid to stamp out emerging outbreaks.

But new variants have tested local officials' ability to snuff out flare-ups faster than they can spread, causing much of the country to live under an ever-changing mosaic of Covid curbs.

Apple has already begun outsourcing part of its production to India and is eyeing Vietnam in a bid to wean itself off Chinese manufacturing -- a trend accelerated by Covid.

But that's not so simple -- last year, nearly 7.5 million iPhones were made in India, just three percent of Apple's total production.

"Increasing the capacity of factories (in India) is difficult," Lam said.

 

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First Published Date: 04 Nov, 01:06 IST
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