Lacking labor for iPhone production, Samsung was lucky because there were no factories in China

Artwork: Getty Images

Before the situation of acute pneumonia caused by new Corona virus (nCoV), China extended the Tet holiday until the end of February 10. Tens of thousands of workers were forced to stay in their homeland due to the movement ban, resulting in labor shortages. Nikkei’s sources said this affected Apple’s iPhone production plan.

An executive in the iPhone supply chain said their problem was not whether or not there was a job offer, but whether they could leave their home because of a travel ban. They lack personnel at the present time.

Analysts warn that the new Corona virus will reduce global smartphone shipments by 10% by 2020. Foxconn, Pegatron – the two largest iPhone assemblers – as well as many other component manufacturers are not out of the trend. general.

Normally, labor productivity during the Tet holiday is very low and gradually increases after that. However, the flu will slow down the pace of labor productivity growth. Two sources revealed that iPhone inventory, especially the iPhone 11, is small, meaning the supply chain is under greater pressure to regain its speed.

Authorities have asked factories to reschedule operations, however, according to sources, Foxconn has been given a “green light” in cities such as Shenzhen and Zhengzhou. But staffing is just one of their challenges. How the factory is not infected with Corona virus is another matter.

A component supplier for Apple and Huawei said that if any employee is positive for nCoV, the entire plant will have to stop operations to sterilize, increasing instability and risk.

Electronic assembly requires a lot of people. Foxconn, for example, employs about 430,000, while Pegatron needs about 200,000 during the peak season. When tens of thousands of workers live and work together in large dormitories, preventing the disease is no small challenge. It is difficult for the boss to keep track of the employee’s travel history, their body temperature in the previous 2 weeks.

Foxconn – a company that experienced the SARS pandemic in 2003 – said it would resume operations from February 10 and take measures to ensure workers’ health. Pegatron establishes direct liaison channels with local authorities to comply with the regulations.

Apple CEO Tim Cook in a meeting with investors said the influence of nCoV so far is unclear. Similar to Apple, many other major Android smartphone companies such as Huawei, Oppo, Vivo and Xiaomi, and notebook manufacturers such as HP and Dell are all dependent on production lines in China. Only Samsung and the giant factory in Vietnam have stopped making smartphones here since 2019 but still need components from this country.

Other manufacturers, such as robots and cars, are concerned about the long-term disruption as some firms say there is no clear sign of when production will be fully restored.

If material and component companies are operating after February 10, it will be a big problem for the whole supply chain. Many important components such as printed circuit boards, passive components, shells, packaging are located in China. Without one of these, they could not ship the product, causing delays and disruptions to the electronics industry.

According to Angelo Yu, CEO of Pixe Moving, their problem cannot be over overnight. Although the car startup will be operating from February 10, their engineers do not have the necessary components to work. This is because Wuhan, the center of pneumonia, an important production center of the Chinese auto industry, will stop all operations until February 24 to limit the spread of nCoV. Even, Vu Han can extend the duration of the suspension while finding a replacement partner is not easy.

In terms of personnel, some of Yu’s employees were trapped in their homeland due to restraining orders, while others refused to leave their homes because they could not buy masks and felt unsafe if they got out. outside without protection measures. Yu said that so far, only half the staff decided to return to work.

Consulting firm Yuanta Investment predicts that smartphones released in the second quarter of 2020 will be delayed. This acute pandemic of pneumonia certainly makes many companies think of diversifying production outside of China.