Taiwan’s Foxconn Technology Group pumped some $500 million into its Indian subsidiary on Thursday, evidently seeking to diversify its supply chain after coronavirus lockdowns and anti-lockdown riots crippled its massive iPhone assembly plant in Zhengzhou, China, last month.
Foxconn sought to minimize the extent of disruptions at its Zhengzhou plant from China’s manic coronavirus lockdowns and the growing public pushback against them, frequently claiming the factory would remain running at nearly optimum levels.
In truth, according to an analysis cited by the South China Morning Post (SCMP) on Friday, the hasty departure of thousands of terrified workers from the locked-down plant – and the violent protests against unpaid signing bonuses held by the people hired to replace them – knocked operations down to about 20 percent of normal in November. The analysis said the Foxconn factory will be lucky to return to 40 percent of normal capacity by the end of December.
That means big trouble for Apple, since the Foxconn factory in Zhengzhou is the world’s largest facility for assembling iPhones. On Thursday, the Wall Street Journal (WSJ) reported that Foxconn founder Terry Gou asked the Chinese Communist Party to ease up on its coronavirus lockdowns because they were damaging global supply chains – and Gou’s letter to Communist Party leaders actually worked:
Chinese health officials and government advisers seized on Mr. Gou’s letter to bolster the case that the government needed to speed up its efforts to ease its tough Covid-19 controls, people familiar with the matter said. The eruption weeks later of nationwide protests gave policy advisers further ammunition to press the case for relaxing measures, two of the people said.
Officials and advisers pushing for softer measures argued the zero-tolerance approach had been successful in protecting public health but the Omicron variant required a shift in tactics, the people said. Omicron is less deadly, those officials and advisers argued, but its highly contagious nature would lead to more lockdowns, at a time the public was growing weary of them, and disruptions to businesses, threatening the country’s status as the world’s factory floor.
Both Gou’s office and Chinese officials vaguely disputed the WSJ report, but if true it would be a remarkable development, because the regime in Beijing previously refused to entertain any criticism of dictator Xi Jinping’s coronavirus lockdown policies, and insisted “zero Covid” policies would remain in effect for the foreseeable future.
The Chinese public pushed back to an unprecedented degree two weeks ago, after a fire in a locked-down residential building killed several families in the Xinjiang provincial capital of Urumqi – the latest and most hideous example of “zero Covid” lockdowns killing Chinese citizens. Protests of previously unimaginable size and vigor swept across China, prompting nervous Communist officials to threaten a brutal crackdown.
It seemed for a while as if the protests might actually threaten Xi’s grip on power, but the Communist Party took steps to defuse public anger by backing away from zero Covid lockdowns and reopening quarantine districts.
The government has not admitted its lockdown policies were mistaken, but it has blamed local officials for enacting those policies with too much zeal. National health officials are also justifying looser policies by pointing out that the highly contagious new variants of Chinese coronavirus are also less dangerous than the original strain.
On Monday, lockdown restrictions were lifted on the district in Zhengzhou where the Foxconn factory is located. The SCMP reported Foxconn is still looking to hedge its bets by purchasing over four billion shares of its India subsidiary, Foxconn Hon Hai Technology India Mega Development Private Ltd, injecting $500 million into the Indian enterprise.
Foxconn is also spending about $300 million to dramatically expand a plant in Vietnam, and last week it announced almost $60 million in additional funding for its subsidiary in the Czech Republic.
The WSJ reported that Apple wants all of its suppliers to diversify their supply chains outside of China, but has not asked them to abandon Chinese operations entirely. Foxconn is evidently still trying to replace the 100,000 or so workers it lost in Zhengzhou, and it recently announced a “long-term investment” of $142 million in the northern Chinese city of Taiyuan.
India’s Mint on Monday applauded Foxconn’s operations in India for cleaning up their act “just in time” to accommodate the company’s renewed interest in diversifying outside China. One year ago, Foxconn’s India staffers were holding protests against poor living and working conditions, much like the recent protests in Zhengzhou:
All workers were forced to stay only in company-run hostels. They had to sleep on the floor as they were not provided with a cot, pillow or even a blanket. As many as 12-15 people were packed in a 150 sq ft room. Toilets, each shared by 20 or 30 people, were unclean. There was no running water. “Water was provided for an hour, two hours before the shift,” says Priya. For the 6 am shift, water was made available at 3 am for the workers to get ready.
As contract workers, they just got two days’ leave in a year apart from weekly offs and public holidays. “If we take leave for the third day, we will be marked as ‘absconding’ and sent home,” says Lakshmi. The process to get permission to step out of the hostel on holidays was too laborious for the two-hour freedom they got. Contract workers were not made permanent even after a year of doing a core job though a Tamil Nadu government law stipulates that they should be after 240 days, several workers and labor unions said.
“I am the only breadwinner in the family. My father is unwell and I have two brothers who are still studying,” Deepa, another worker Mint spoke to, responds, when asked why she put up with such living conditions. You would hear similar stories from other workers—many of them come from bottom-of-the-pyramid households.
The Foxconn plant in India reopened after addressing some of these issues, and in November the company announced plans to increase its workforce by 53,000 to react a total of 70,000 – a substantial boost, but still far smaller than the Zhengzhou mega-factory, which has 300,000 employees at the peak of holiday season.