Foxconn apologises for pay-related error at China iPhone plant after worker unrest

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By Yimou Lee and Brenda Goh

TAIPEI/SHANGHAI (Reuters) - Foxconn said on Thursday a pay-related "technical error" occurred when hiring new recruits at a COVID-hit iPhone factory in China and apologised to workers after the company was rocked by fresh labour unrest.

Men smashed surveillance cameras and clashed with security personnel as hundreds of workers protested at the world's biggest iPhone plant in Zhengzhou city on Wednesday, in rare scenes of open dissent in China sparked by claims of overdue pay and frustration over severe COVID-19 restrictions.

Workers said on videos circulated on social media that they had been informed that the Apple Inc (NASDAQ:AAPL) supplier intended to delay bonus payments. Some workers also complained they were forced to share dormitories with colleagues who had tested positive for COVID.

"Our team has been looking into the matter and discovered a technical error occurred during the onboarding process," Foxconn said in a statement, referring to the hiring of new workers.

"We apologize for an input error in the computer system and guarantee that the actual pay is the same as agreed and the official recruitment posters." It did not elaborate on the error.

The apology was an about-face from a day earlier when Foxconn said it had fulfilled its payment contracts.

The unrest comes at a time when China is logging record numbers of COVID-19 infections and grappling with more and more lockdowns that have fuelled frustration among citizens across the country. But it has also exposed communication problems and a mistrust of Foxconn management among some staff.

The largest protests had died down and the company was communicating with employees engaged in smaller protests, a Foxconn source familiar with the matter told Reuters on Thursday.

The person said the company had reached "initial agreements" with employees to resolve the dispute and production at the plant was continuing.

Mounting worker discontent over COVID outbreaks, strict quarantine rules and shortages of food had seen many employees flee the enclosed factory campus since October after management implemented a so-called closed-loop system that isolated the plant from the wider world.

Many of new recruits had been hired to replace the workers who had fled - estimated by some former staff to number thousands.

The Taiwanese company said it would respect the wishes of new recruits who wanted to resign and leave the factory campus, and would offer them "care subsidies". The Foxconn source said the subsidies amounted to 10,000 yuan ($1,400) per worker.

APPLE RISKS

Home to over 200,000 workers, Foxconn's Zhengzhou plant has dormitories, restaurants, basketball courts and a football pitch across its sprawling roughly 1.4 million square metre facility.

The factory makes Apple devices including the iPhone 14 Pro and Pro Max, and accounts for 70% of iPhone shipments globally.

GRAPHIC: Large bite of the apple (https://graphics.reuters.com/APPLE-INDIA/xmpjkgzxdvr/chart.png)

Apple said it had staff at the factory and was "working closely with Foxconn to ensure their employees' concerns are addressed”.

Several shareholder activists told Reuters the protests showed the risks Apple faces through its reliance on manufacturing in China.

"The extreme dependence of Apple on China, both as a (consumer) market and as its place of primary manufacturing, we see that a very risky situation," said Christina O’Connell, a senior manager for SumOfUs, a nonprofit corporate accountability group.

Reuters reported last month that iPhone output at the Zhengzhou factory could slump by as much as 30% in November and that Foxconn aimed to resume full production there by the second half of the month.

The Foxconn source familiar with the matter said it was not immediately clear how much impact the worker protests might have on production for November and that it might take a few days to work that out, citing the large size of the factory.

A separate source has said the unrest had made it certain that they would not be able to resume full production by month-end.

GRAPHIC: Foxconn's iPhone shipment projections (https://graphics.reuters.com/APPLE-INDIA/znvnbdygevl/chart.png)

Apple has warned it expects lower shipments of premium iPhone 14 models than previously anticipated.

GRAPHIC: More than half of Apple's revenue is from iPhone sales (https://graphics.reuters.com/HEALTH-CORONAVIRUS/FOXCONN-CHINA/zjpqjqargvx/chart.png)

($1 = 7.1353 Chinese yuan)