Major manufacturers of some of the world’s most sought-after products are scrambling to spread production efforts elsewhere due to prolonged pandemic impacts in India and Vietnam in particular.
Bac Giang Industrial Zones Management Authority is making efforts to cooperate with Apple supplier Foxconn, which runs three manufacturing facilities in the province, in an attempt to help resume operations at full capacity as soon as possible.
Fuyu Precision Component Co., Ltd. – a facility of Foxconn Singapore – has struggled with pandemic-related restrictions at Quang Chau Industrial Zone (IZ) since the latest outbreak hit the north of the country and major manufacturing sites in May.
A Foxconn Vietnam representative confirmed to VIR that the company has yet to resume at full capacity because a large volume of the labour force was isolated.
In mid-May, Bac Giang People’s Committee asked entire tenants in four IZs to suspend operations in order to prevent the spread of the pandemic. They include Fuhong Precision Component (in Dinh Tram IZ) and New Wing Interconnect Technology (in Van Trung IZ) started to resume operations in part by the end of the month.
It was also reported in June that production in one Indian iPhone plant was halved after more than 100 Foxconn employees tested positive.
The difficulties in daily operations for Fuyu and others mean that the suppliers are having to ramp up operations in locations with fewer restrictions in order to reach their targets, especially in China.
A representative of the Ministry of Planning and Investment’s Foreign Investment Agency noted that factories on the Chinese mainland are possibly being tasked with assembling new iPhones in order to release them as scheduled in the fall. However, China may not necessarily be the long-term destination for Apple suppliers due to high labour costs – one of the reasons diversification from China was taking place before the pandemic.
Media reports have added to the assumption that Foxconn in China is ramping up operations to offset the decrease in capacity from the Indian and Vietnamese markets. Global Times reported that Foxconn has also been ramping up recruitment on the Chinese mainland amid COVID-19 resurgences in India and Vietnam, causing major disruptions in both production lines and supply chains. “This isn’t a temporary move but one that will last for six months or even a year,” a source from Foxconn told Global Times last month.
Analysts noted that Foxconn may also be hiring for the mass production of new Apple products like iPhones, as orders flow back to China. The Foxconn factory in Zhengzhou in central China raised its bonus for new workers to over $900 from the previous $550 per person at the end of May. New workers will get the bonus if they work for at least 55 days within a period longer than 90 days, according to a recruitment notice from the factory in mid-June.
Similarly, iPhone production hub Shanghai Pegatron recently raised its recruitment bonus, with a rebate increased from $850 up to $1,300 to meet the manpower demand in the upcoming peak season.
Last year, Apple moved about eight factories and production lines from China to both India and Vietnam. Its partners have poured billions of US dollars to build new factories and purchase machines – however, COVID-19 has posed as a huge challenge for iPhone production, not only in these markets but in Taiwan as well.
The ongoing events are somewhat of a backwards step for Foxconn’s plans. In January, Bac Giang People’s Committee granted an investment certificate for the Fukang Technology Factory project of Foxconn worth $270 million. The factory would be located in Quang Chau IZ with the goal of manufacturing and processing tablets and laptops with a capacity of about eight million products per year. However, construction has yet to be kicked off and there is no current timeline for operations.
Speaking at the ceremony to receive the certificate, a company representative said that the company was to add 10,000 positions in Vietnam this year. In early 2021, Foxconn indeed posted recruitment notices for the positions of electronic component assemblers and engineers for its factories in both Bac Ninh and Bac Giang.
In an interview last week with Hoang Sy Tuan, deputy director of the Investment Trade Tourism Promotion Agency of the north-central province of Thanh Hoa, he noted that Foxconn was still considering three locations offered by Thanh Hoa People’s Committee to develop a $1.3-billion project to produce electronic parts for Apple. The locations include Nghi Son Economic Zone in the west of the province and another one in Thieu Hoa district. Once complete, the plants could generate 100,000-150,000 jobs and $10 billion in export revenues per year.
“The agency often contacts Foxconn to support it to understand more about the investment environment of the province. The investor will arrive in the province for field surveys once the pandemic is controlled,” Tuan said.