China’s zero-COVID strategy is interfering with the US holiday season.

China’s zero-COVID strategy is interfering with the US holiday season.

Beijing’s zero-tolerance approach to eradicating COVID-19 outbreaks across the country may cause major pressure on year-end production quotas as the US holiday season approaches and Porcelain.

On Wednesday, authorities in Zhengzhou, a city of about 10 million people in the central province of Henan, closed a major industrial park that is home to major Apple Foxconn supplier. The Taiwanese electronics manufacturer employs about 200,000 people, who have been assembling the latest iPhone 14, but also devices for Microsoft, Googlesony and Amazonamong others.

The roughly 600,000 people who work in the Zhengzhou Airport Economic Zone will have their movements restricted for a week until Nov. 9, district officials said. Along with other Zhengzhou neighborhoods with positive cases, the industrial area will undergo mandatory daily testing for the virus.

Non-essential personnel and vehicles are not allowed on the streets, while certain key but unspecified businesses will continue to operate on a “closed loop”, officials said. It’s unclear what kind of deal Foxconn has struck with local authorities, but the supplier said production at its plant in “iPhone City” would continue as normal.

China's COVID restrictions threaten the holiday season
The Foxconn headquarters in Tucheng District, New Taipei City, Taiwan, on May 6, 2022.
Sam Yeh/AFP via Getty Images

COVID bubbles have been implemented with mixed results in the past. Quanta Computer, which assembles Apple’s MacBooks, received a license to operate throughout the city during the campaign. lockdown in Shanghai in the spring, but it did not stop a spike in infections among employees.

Zhengzhou’s rapid lockdown has heightened scrutiny of an opaque cluster of infections at Foxconn, where hundreds of thousands of employees were filmed escaping their dormitories over the weekend to avoid mandatory quarantine in poor living conditions.

So far, the company has refused to give details about the size of the outbreak. After an online backlash over the exodus of workers, he has promised to make it easier for them to return home, but is also ramping up efforts to retain its workforce to meet domestic and foreign demand.

On Tuesday, Foxconn quadrupled its daily attendance bonus for assembly line staff to 400 Chinese yuan ($55), with full attendance this month likely to see workers earn an additional 15,000 yuan ($2,060) on top of regular wages, according to a company announcement.

Foxconn makes 70 percent of iPhones, most of them at its Zhengzhou site, according to the latest estimates. Apple has moved some production to India in a bid to reduce risks, but its current reliance on the Chinese market means the situation comes at a particularly unfortunate time.

The assembler will have held component stocks and may maintain operations for some time, but it is unclear how it plans to address supply chain disruption amid the latest COVID restrictions, especially as consumer demand is expected to rise. during Thanksgiving and Christmas in the US and during the Lunar New Year in January.

Apple said it generated a third of its iPhone sales last year during the holiday period.

China's COVID restrictions threaten the holiday season
A health worker passes a vial that will be used in a nucleic acid test on October 14, 2022 in Beijing, China.
Kevin Frayer/Getty Images

His press office did not respond to news week‘s about an expected supply shortage in the coming weeks, but a Reuters report on Monday said iPhone production could fall 30 percent this month due to China’s zero-COVID policy.

Apple is trying to ramp up production at another assembly plant in Shenzhen, a manufacturing hub in the southern province of Guangdong, but the region has also been subject to the hardening virus. restrictions.

New COVID infections in the country rose by more than 2,000 on Wednesday for the third day in a row, with Zhengzhou accounting for 359, according to China’s national health authority.

The vast majority of cases are mild or asymptomatic, but the exodus of Foxconn staff was just one example of the public’s fear of the virus and, more importantly, the impact on their freedom that follows a positive test.

Policy experts say the mood is directly related to that in Beijing. framed of COVID as an existential threat, and zero COVID—President Xi JinpingThe firm’s public health strategy, as the only way to beat the pandemic.

The fear and stigma surrounding COVID infections have also fueled rampant online rumors about the scale of the outbreak among Foxconn staff. On Tuesday, the company denied that employees in one of its dorms had died after contracting the virus.

“There are no fatalities at our facilities,” Foxconn said.

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