Sourcing, Contract Manufacturing and Supplier Power

In the autumn of 2022 the largest iPhone factory in the world was a campus in Zhengzhou, the capital of Henan province in central China. Foxconn, the Taiwanese contract manufacturer formally known as Hon Hai Precision Industry, had opened it in 2010 with the provincial government's support, and by 2022 it was reported to employ about 200,000–300,000 people at peak and to assemble most of Apple's iPhone 14 Pro models, which had launched in September into demand that exceeded supply (reported). The December quarter is Apple's busiest; a disruption then costs more than at any other time of year.

China was still enforcing its zero-COVID policy. When cases rose in Zhengzhou in mid-October, Foxconn kept the plant running as a "closed loop", with workers confined to the campus and its dormitories. Reports of food shortages and fear of infection led thousands to leave, and in late October videos circulated of workers walking home along highways (reported). On 2 November the area around the airport where the plant stands was locked down. On 6 November Apple said that the plant was "operating at significantly reduced capacity" and that iPhone 14 Pro shipments would be lower than expected (company statement, reported). Foxconn offered bonuses to those who stayed and, with the Henan government, recruited replacements with promised bonuses. On 22–23 November new hires protested that the bonus terms had changed; videos showed clashes with security staff and police were deployed (reported). Foxconn blamed a "technical error" in its payroll system, apologised, and paid new hires who chose to leave, reportedly about 10,000 yuan each.

Output recovered from December, as China abandoned zero-COVID. By then American customers had waited weeks for Pro models. Apple reported revenue of about $117.2 billion for the December quarter, down about 5% from a year earlier, and iPhone revenue of about $65.8 billion, down about 8%; analysts' estimates of lost iPhone output ran to about six million units or more (reported). Freight had not been the constraint, nor parts. The constraint was the labour of one campus, in one country, under one government's rules, in the one quarter that mattered most.