Behind Foxconn’s China woes: mistrust, miscommunication, COVID curbs

By Yew Lun Tian, Yimou Lee and Brenda Goh

SHANGHAI, Nov 29 (Reuters) – When officials from his
Chinese village approached Hou last month, urging him to work at
the world’s largest iPhone factory for at least twice the usual
pay, he knew it was risky.

Tens of thousands of workers had fled the plant in central
China in previous weeks and violent protests had erupted over a
COVID-19 lockdown and confusion over hiring bonuses.

But Hou, 24, who asked to be identified only by his family
name, told Reuters he took the job at the Zhengzhou plant
belonging to Foxconn, Apple’s biggest iPhone maker,
making 70% of iPhones globally.

The crisis could cut production for November at the factory
by at least 30%, a Foxconn source told Reuters on Thursday, a
development that has hit Apple’s share price.

The plant owned by Taiwan-based Foxconn, battered by China’s
strict COVID restrictions and facing critical year-end holiday
demand, was offering enticing hiring bonuses and excellent pay.

Hou said he was promised up to 30,000 yuan ($4,200) for just
under four months’ work – far above the 12,000-16,000 yuan
Foxconn workers usually get for four months.

But he said he had not bargained on a 10-day spell in
quarantine and the sudden notification that employees would have
to work an extra month before receiving their hiring bonuses.

Such grievances, Hou and two other workers told Reuters,
prompted them to confront Foxconn management at the plant –
essentially a city of more than 200,000 employees – leading to
sporadic clashes that made headlines worldwide.

In a rare example of large-scale labour unrest in China,
Foxconn workers in COVID masks clashed with security personnel
in white hazmat suits holding plastic shields. Some
demonstrators smashed surveillance cameras and windows with
sticks.

In addition to the challenges of keeping factory lines
operating under a closed-loop system mandated under Beijing’s
zero-COVID policy – requiring workers be isolated from the wider
world – Foxconn’s turmoil also exposed communication problems
and a mistrust among workers of management at the top Apple
supplier.

“Nothing they said counted for anything,” Hou said from his
hometown after taking a 10,000-yuan payout Foxconn offered on
Thursday to protesting workers who agreed to leave.

Hou, who had worked in jobs such as sales and says he was
told no factory experience was necessary, never made it to the
production line.

‘MY LIFE WAS WORTH MORE’

Five other workers said at the time that they were afraid
because Foxconn began shifting COVID-positive people to a vacant
housing project without disclosing the infections and told
workers to eat in their dormitories instead of company canteens,
but then failed to segregate infected workers from others.

Foxconn declined to comment on the claims by Hou and other
workers, referring Reuters to past statements.

The company previously apologised to workers for a
pay-related “technical error” that it said occurred when it was
hiring. It has not said why it was paying people to leave soon
after promising them hiring bonuses.

In late October, after scenes of fleeing workers started
trickling out, Foxconn said it was bringing the situation under
control and was coordinating with other plants to increase
production.

If the problems persist through December, it will cost
Foxconn and Apple the output of around 10 million iPhones, equal
to cutting iPhone shipments 12% in the fourth quarter, said KGI
Securities analyst Christine Wang.

Foxconn managers said the company was caught in a difficult
position, having to speed up shipments during Apple’s most
important holiday season while following local government’s
strict COVID guidelines.

“It was the busiest time of the year,” said a senior Foxconn
official, adding that an October COVID outbreak on the Zhengzhou
campus caught the company off guard and triggered “a mess”.

“There was pressure for everyone, including for the local
government,” the official said, referring to local authorities
rushing to help recruit replacement workers.

What happened at the plant was the “epitome” of what
companies face under China’s rigid COVID policy, and it will
“push production lines out of China at a greater speed”, the
official said.

Marina Zhang, an associate professor at the University of
Technology Sydney’s Australia-China Relations Institute, said
Foxconn’s woes sent a message to companies trying to keep
Chinese operations going and keep workers COVID-free in line
with national policy.

“A company’s internal communications can be totally
overpowered, overwhelmed by social media,” Zhang said. “They
lose power to social media – no one is going to listen to them.”

One worker, Fay, said he feared catching COVID and anguished
whether to stay on for two more weeks to claim a bonus for
completing his three-month contract. Eventually, he says, he
crawled out through a hole in a green metal fence.

“In the end, I decided that my life was worth more.”

(Reporting by Yew Lun Tian in Singapore, Yimou Lee in Taipei
and Brenda Goh in Shanghai; Editing by Anne Marie Roantree and
William Mallard)