Production at factories across China has been stifled in recent weeks as the deadly coronavirus continues to keep the world’s most populous country in a stranglehold.
As of Thursday, more than 2,000 people had died and 75,000 were believed to have been infected by the virus. This has led to widespread quarantines across China’s Hubei province and elsewhere, with several countries (including the U.S.) instituting partial travel bans and requiring quarantines for anyone who had recently visited China.
Foxconn Technology Group, the world’s No. 1 producer of electronic devices, has repeatedly declined to comment on the current operations of its factories, which make products for Amazon, Nintendo, Sony, Microsoft and Apple.
But insights from industry experts who spoke with The Journal Times illustrate how China’s slow attempts at returning to normalcy are affecting global markets now and into the future.
In 2017, the Village of Mount Pleasant was chosen by Foxconn as the site of an American manufacturing plant. Plans for that factory have been slowed with numerous changes and other delays, leaving many to wonder what might actually be produced here.
Foxconn had been predicting revenue growth of up to 5% in 2020, but that estimate has dropped down to 1-3%, according to reporting from Bloomberg. In 2019, Foxconn reported making $17.79 billion USD, so every 1% of change is equal to around $177.9 million.
A four-day break from work to celebrate the Lunar New Year across China was supposed to end at the end of January. That holiday was extended by two weeks because of coronavirus (also known as COVID-19). And that extended break was supposed to end Feb. 10, but many employees at Foxconn’s factories and other factories in China did not return to work right away.
Collins, a Detroit native, has lived abroad for 30 years, mostly in China — although he’s avoiding China for the time being. He explained what’s going on with Chinese manufacturing right now:
Many Chinese cities, particularly in the western part of the country, have quarantined themselves. No one from outside the city is allowed in, for fear of spreading the virus.
“Some cities are a little paranoid. The smaller ones especially have put locks on some of the streets and they won’t let outsiders in unless they can check you,” Collins said, adding that cities where fears are greatest the closer you get to the epicenter of the outbreak in Wuhan.
In manufacturing hubs like Shenzhen (where Foxconn’s largest facility is located) and Wuhan (where Foxconn’s second largest facility is located), returning to work is a complicated process, especially considering the holiday break.
First, every factory needed to individually apply for a certificate from the Chinese government, which the government would only approve if it concluded there were sufficient precautions and safety measures in place, such as hand-washing stations, mandatory temperature tests, face masks, etc.
Most major factories have been able to reopen this past week.
Then, if one of the employees at the Shenzhen plant actually lives in Shenzhen, they could return to the factory floor. However, since most of the employees at the factory only reside in dormitories in Shenzhen, the majority of them had gone home to be with their families for the Lunar New Year holiday.
In its report, TrendForce concluded “because most workers at … manufacturing sites in China come from out of town, labor shortages and traffic restrictions will lower work resumption rates at foundries more than expected.”
“This virus, apparently the transmission is very rapid,” added Paul Tiffany, a senior business lecturer at the University of California, Berkeley, who teaches courses every year in China.
For those employees to get back to work, they need to pass a 14-day observation period.
First, they need to return to the dormitories, where they will live in small groups for two weeks on isolated floors. If they don’t show symptoms of the coronavirus after those two weeks, then they can go back to work.
Collins estimated “around 30-40% of the people are back in the factories now” nationwide, including for most Foxconn facilities.
On Wednesday, a 34-year-old Foxconn employee told NPR: “One production line used to have 4,000 people. Now there are about a dozen remaining. My own production line usually has 1,000 workers, with about 60 now remaining.”
Other Foxconn plants that aren’t affected by coronavirus are now fighting to pick up the slack.
“Foxconn’s operations in Mexico are running at full speed,” Tiffany said.
In a statement from Foxconn Technology Group issued Friday morning: "While our facilities in China have been delayed in their return to normal operations, our facilities in a number of other markets, including Vietnam, India and Mexico, are running at full capacity and expansion plans for some of our global facilities are being rolled out. We will provide updates on these and other relevant developments as information becomes available."
“What’s going to happen in the next few weeks? I’m not so sure,” Collins wondered. He estimated that 70-80% of the employees at Foxconn’s Shenzhen plant could be back to work by the middle of March.
With Wuhan, it’s another story. That’s where coronavirus first broke out and is hitting the hardest.
“If you’re from Hubei province (where Wuhan is the capital), you’re not working, you’re not doing nothing. No matter what,” Collins said.
Looking further ahead than just 2020, Tiffany thinks that this outbreak could finally convince some companies to move away from China.
By having so much of the world’s manufacturing in one place, disasters and pandemics become all the more damaging. If a business’s manufacturing is located solely in China, and all of China is affected by coronavirus, that business is in trouble.
“This might be a harbinger for some companies to think ‘We need to rethink our emphasis on China,’” Tiffany said. “I think longer term a lot of firms are going to more rapidly spread manufacturing around ... These sorts of unplanned incidents are going to continue. There’s so much uncertainty out there today.”
This is already starting as rising labor costs in China have pushed manufacturers to build elsewhere in East Asia, namely Vietnam, Cambodia and Thailand.
Tiffany characterized their thinking like this: “Companies start to think: ‘I will trade off the scale of a big factory to instead have a number of smaller operating venues … that can quickly absorb demand … if one of the other areas is shut down.’”
Tiffany added that the coronavirus could indirectly help American industry down the road. He pointed to President Trump’s goal of bringing more blue-collar jobs back to the states. If the coronavirus scares manufacturers away from China, they might come to the U.S.
“Trump got lucky,” Tiffany said, “with some of his calls to bring companies home.”
Updated: A statement from Foxconn Technology Group has been added to this story after it initially published.
Racine-area certified financial planner Michael Haubrich has taken Journal Times reporter Michael Burke on several flights for the purpose of taking documentary photos of Foxconn Technology Group's developing campus in Mount Pleasant.
Foxconn High Performance Computing Data Center
Foxconn, Feb. 3
Foxconn Feb. 3
Foxconn Feb. 3
Foxconn Feb. 3
Foxconn, Dec. 15, 2019
Foxconn aerial 12/15
Foxconn aerial 12/15
Foxconn "fab" Oct. 18
Foxconn aerial, "fab" Oct. 18
Foxconn aerial Oct. 18
Foxconn aerials, Oct. 18
Foxconn aerials, Sept. 20, 2019
Mike Haubrich with plane
At a Glance
The Global Times, a China-based English-language newspaper, reported on Feb. 15 that “Foxconn plans to resume 50% of its manufacturing in the mainland by end of Feb and 80% in” March.
Adam does a little bit of everything with the JT, from page editing to covering homelessness to localizing state & national politics. He grew up in Racine County, believes in the Oxford comma and loves digital subscribers: journaltimes.com/subscribenow
A woman wears a mask while typing on an iPhone at a market in Hong Kong on Thursday. Apple, which produces the iPhone, and Foxconn, which manufactures iPhones for Apple, have both predicted smaller revenues this year as a direct result of the outbreak of the deadly coronavirus in East Asia.