Apple Supplier Foxconn’s Factory Exodus Casts Shadow On Retail Supply Chains

A COVID-19 outbreak has just struck the plant of Apple’s biggest supplier Foxconn in Zhengzhou, the capital of China’s central Henan Province. Foxconn has not released the exact COVID caseload inside the complex, which hosts about 200,000 employees. However, the situation was apparently dire enough that many migrant workers opted to walk home, trekking dozens or even hundreds of miles along roads and country fields.

According to Reuters, iPhone production at the plant could slump by as much as 30 percent next month. This will greatly impact the retail of these items worldwide since Foxconn contributes to about 70 percent of global output, with the majority coming from the Zhengzhou facility. This outbreak highlights the uncertainty facing China-based supply chains amid the country’s zero-Covid policy. 

The exodus gained nationwide attention with viral videos appearing online. And many localities in Henan issued notices directing those returning from Foxconn to report to local authorities for quarantine, with some dispatching vehicles to pick up returnees halfway. On Weibo, the hashtag “Multiple Henan localities reach out to returning Foxconn workers” has gained 940 million views. There were also acts of kindness: aid stations with free snacks and bottled water were set up by those who reside along the routes.

Despite the initial chaos, there are signs that the situation is coming under control. Henan authorities have sent out designated individuals to oversee strengthened pandemic control efforts within the factory. On October 30, Foxconn stated that the outbreak is “becoming stabilized” and that canteens have reopened. It is also coordinating with the government for an “orderly return” of employees who wish to go back home. Reports have revealed that Foxconn is giving out daily cash subsidies for those who choose to remain at the facility.   

Fashion or tech houses that rely on mainland manufacturing should brace for the potential impact of a Foxconn-like scenario on their supply chains. Sizeable production facilities adopted “closed-loop systems” amid Beijing’s “Dynamic Zero” policies, meaning that workers live and work onsite to minimize interactions with the rest of society. However, factories are ill-equipped to provide food, necessities, and medical relief for affected workers during internal outbreaks. Workforce retention will also become an issue if the outbreak is not handled well, as this case has shown. Brands should have a plan B in place in case of disruptions.