Foxconn workers face cutbacks due to iPhone sales slump

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Foxconn workers had depended on copious amounts of overtime pay to make a good wage. Photo: Reuters/Bobby Yip

01 March 2019 | Cissy Zhou | InkStone

On an otherwise unremarkable Saturday in a central Chinese city, hundreds of workers at the world’s largest iPhone assembly plant lined up to quit their jobs.

 

In the years since robust sales of the iPhone turned Apple into one of the biggest companies on the planet, the workers in the city of Zhengzhou had never seen anything quite like this: a slowdown in the demand for their labor.

 

“In 2017, we were churning out iPhone 8s. I was thrilled that I could work 11 hours every day and didn’t take any leave on weekends,” said Haixia, a worker at the factory, which is owned by the contract manufacturer Foxconn.

 

But the days of plentiful overtime, she lamented in an interview in late February, are over.

 

Like many of the more than 100,000 migrant workers who live and work in the area, she counted on that overtime pay to make a decent living.

But a sharp drop in iPhone sales since the middle of last year has cast a shadow over the manufacturing giant – and workers whose fortune depended on it.

 

Around two dozen workers told the South China Morning Post that their salaries had been cut at the end of last year. They were used to this happening on the low season – but the low season came much earlier last year.

 

On top of the cuts, Foxconn has scaled back employee benefits at the Zhengzhou facility, one of the company’s 45 factories scattered throughout China.

 

A notice in Foxconn's Yukang dormitory compound says that as of as of January 1 2019, free laundry services will no longer be provided.

A notice in Foxconn’s Yukang dormitory compound says that as of as of January 1 2019, free laundry services will no longer be provided. Photo: Cissy Zhou

A shuttle bus service ferrying workers between manufacturing facilities and their dormitory has been canceled, forcing some workers to walk for up to 40 minutes to get to their rooms.

And a free laundry service was cut at the beginning of the year. Employees now have to pay 7 yuan ($1) to wash a load of laundry.

 

That’s hardly spare change to many of the migrant workers, who take home about 2,000 yuan ($450) every month in basic salary.

 

New housing developments near Foxconn’s Zhengzhou factory.

New housing developments near Foxconn’s Zhengzhou factory. Photo: Cissy Zhou

For years since the iPhone’s 2007 debut, the rising fortunes of Apple had uplifted not just the Chinese workers, by giving them plenty of overtime work, but also the entire region.

Output from Foxconn factories, including smartphones assembled for Apple and other vendors, had been the biggest contributor to the strong export performance of Henan province, where the Zhengzhou factory is based.

 

Chinese Ministry of Commerce data show Henan’s mobile phone exports – most assembled at Foxconn facilities – were valued at 211.6 billion yuan ($31.6 billion) in 2018, accounting for 38.4% of the province’s exports.

 

Foxconn’s latest shipment data is not available, but information released by Zhengzhou’s customs administration show that Henan’s mobile phone exports plunged 23.7% in January compared to a year earlier.

 

Apple CEO Tim Cook announced a 5% drop in revenue.

Apple CEO Tim Cook announced a 5% drop in revenue. Photo: Karl Mondon/Bay Area News Group/TNS

Apple CEO Tim Cook announced in January a 5% fall in the company’s fourth-quarter revenue, attributed to weaker demand for new iPhones in China and fewer phone upgrades in the rest of the world.

Last summer, Apple became the first publicly traded company in the United States to reach a trillion-dollar market value.

 

But the good times didn’t last; Apple’s share price today is down around 25% from its October peak.

 

The reversal is being acutely felt in the province.

“It’s like we put all our eggs in one basket. Henan relies too much on Foxconn for exports. When its orders decreased, both employment and exports were affected,” Liu Zhe, the member of China’s political advisory legislative body representing the province, told the Post.

Rumors surfaced that Foxconn had axed 50,000 seasonal workers after October, but in fact most workers had resigned due to a lack of overtime opportunities, resulting in lines forming every day to complete their exit paperwork.

 

Foxconn did not respond when contacted by the Post for comment.

 

Due to the high resignation rate, a Foxconn recruiter told the Post that it had been told to find 50,000 new workers in the next two months.

 

Chinese technology news portal IT Home has reported that the Zhengzhou facility needed to recruit new workers because it had received a fresh batch of orders from home-grown electronics-maker Huawei.

Cissy is a contributor to Inkstone. She is a reporter for the South China Morning Post.

 

Original Link: This photo shows what happens when iPhone sales drop

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