Tight chip supplies disrupt Foxconn's production

Several factories of Foxconn, Apple's major original equipment manufacturer (OEM) in the Chinese mainland, have abruptly suspended most recruiting efforts as production lines are disrupted by tight supplies of chips and other raw materials, which could affect shipments of the new iPhone 13 series, industry insiders said. The persistent chip shortage faced by the technology industry is affecting the production of some of Apple's new products. Due to the shortage, Apple expects to cut the production of the iPhone 13 series in 2021 by as much as 10 million units. Some assembly lines have been dismantled because there were inadequate raw materials, and temporary workers on certain assembly lines are no longer needed, a recruitment manager with Foxconn based in Guangdong province confirmed. “Now the one-time bonus for workers is CNY5,100, but it was CNY8,000 to CNY9,000 just before the National Day holiday,” the manager said. Bonuses were cut because there were fewer orders, as foreign raw materials cannot be shipped, which in turn reduces the shipments of Apple products.

This came after months-long mass recruitment campaigns by Foxconn with several rounds of bonus raises to draw as many workers as possible ahead of the launch of the iPhone 13 in September, industry insiders told the Global Times. Ma Jihua, a veteran industry analyst, told the Global Times that “the annual plans of many manufacturers have been disrupted, and there's no guarantee that the orders would be fulfilled”. It is not that iPhone 13s cannot be sold, but Apple is facing hurdles in production and transportation, Ma said. A market study by Tianfeng Securities predicted that the first batch of iPhone 13 series orders will reach 90 million units in 2021, higher than the 80 million iPhone 12 series in the same period last year.

While the supply chain is difficult to improve because it is a systemic problem, Luffy Lin, Chief Analyst at Witdisplay, an electronics device consulting platform, told the Global Times that Apple has at least three months of inventory on hand, and it is controlling the pace of shipments so that it can always ship a certain volume every month, the Global Times reports.