Foxconn and Apple supply: What are the effects?

September 24, 2012

Foxconn has stopped production at its facility in Taiyuan, China, following the eruption of a huge fight Sunday night that reportedly involved around 2,000 workers of the Apple contractor.

Reports indicate that the fight broke out in the company dormitories, though accounts conflict as to whether the fight was between groups of workers — the company’s official account — or between workers and factory guards.

The incident brings fresh scrutiny to Foxconn, already in the public eye after a rash of employee suicides, a plant explosion and several reports of unsafe or unfair working conditions.

Foxconn, the trading name for Hon Hai Industries, contracts with several electronics and other companies, such as Apple, Microsoft, Dell and HP, to produce and assemble products. The company’s factories are among the final assembly plants for the iPhone and iPad. As the popularity of Apple products has grown, so, too, have questions about Foxconn and the way it treats its workers.

The news also comes as Apple announced that it sold more than 5 million iPhones in its first weekend and that demand for the phones outstripped the company’s supply. The company said it was able to fill a majority of pre-orders but that some will be delayed until October.

Sterne Agee analyst Shaw Wu said that it’s likely the Taiyuan plant makes at least some components for Apple products. But he said a shutdown should not have much effect on supply lines because of the way Foxconn spreads out its manufacturing.

“It’s very unfortunate for this to happen,” Wu said, but added that, in terms of production, “it’s probably going to be immaterial, a very short-term blip at worst.”

The company has taken steps to have multiple plants produce multiple products to limit the impact that problems at a single plant may have on the whole company. Wu also noted that the Taiyuan plant has 70,000 workers — a large number, but a fraction of Foxconn’s overall workforce of 1 million.

“This is not the only facility,” he said.

Related stories:

Foxconn plant in China closes after workers’ brawl

Foxconn denies vocational students forced to work

Apple’s iPhone 5, in stores now

Foxconn factory shown in Marketplace video

Hayley Tsukayama covers consumer technology for The Washington Post.
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