Apple asked Foxconn to recruit iPhone 14 assembly workers early – Taiwanese report

Taiwanese media reports that Apple asked Foxconn to begin recruiting iPhone 14 assembly workers earlier than usual in China, alongside boosting recruitment of those working on iPhone 13 production at its Zhenzhou plant.

Foxconn has responded by boosting its recruitment bonus by 30% in what is generally an off-season for iPhone production …

United Daily News says that there wouldn’t generally be recruitment of iPhone workers at this time of year, but as Foxconn’s main iPhone assembly plans are located in Zhenzhou – a city which has so far escaped full COVID-19 lockdowns – Apple wants to boost capacity there to balance out lost production elsewhere in China.

Foxconn usually offers a recruitment bonus of around RMB6500 ($984) to workers who remain in post for at least 90 days, but has now increased this to RMB8500 ($1,286). While these sums may seem small, the increased amount is well over a month’s average salary.

The iPhone assembler has a range of COVID-19 precautions in place, including a negative test being required for anyone entering the plant, worker or visitor.

One of the key COVID-19 tactics adopted by Foxconn has been what is known as closed-loop production. Most workers live in accommodation within the plant, remaining there for weeks at a time to ensure that they cannot be exposed to infection outside the facility. A looser version, in areas of lower risk, allows workers to be directly shuttled to and from home.

Apple is said to be liaising with the regional government to agree to these and other methods of allowing iPhone production to continue through future COVID-19 outbreaks. While the government’s aim is to eradicate the infection from the country, most are skeptical about the feasibility of this goal, and the population is growing increasingly frustrated with highly restrictive lockdowns.

Apple warned during its recent earnings call that a range of headwinds would cost the company somewhere in the region of $4B to $8B in the current quarter.

Supply constraints caused by COVID-related disruptions and industrywide silicon shortages are impacting our ability to meet customer demand for our products. We expect these constraints to be in the range of $4 billion to $8 billion, which is substantially larger than what we experienced during the March quarter.

CEO Tim Cook said that five factors concerned the company:

• Component shortages
• COVID-19 disruption in China
• Exchange rate weaknesses
• Loss of Russian sales
• Inflation reducing consumer spending power

Its real nightmare scenario would be major shortages and disruption during iPhone 14 production, so it makes sense that the company would aim to bring assembly capacity online earlier than usual to help mitigate this risk.

Analysts are generally optimistic, but one did warn that the exchange rate challenge may force Apple to raise product prices outside the US, which could mean that both iPhone 14 supply and demand are hit.

We, however, consider FX and Russia to be more permanent, and now fear that Apple may need to raise prices in local currency when new products launch in the fall, if exchange rates don’t change by then. When that’s happened in the past, rising local prices have a negative effect on unit demand.

There are also longer-term fears that Tim Cook’s assembly strategy may come back to haunt him.

Photo: iFixit