Why iPhone workers in China will take a break over the Lunar New Year

Foxconn, the Chinese company that makes most of the company's iPhones, is letting workers go on a holiday break for the Lunar New Year, which begins in February, amid reports of Apple reducing production orders for its new iPhone models.

As Apple transitions into selling newer iPhone models after introducing its iPhone 6S and 6S Plus in September, the company’s decision to scale back orders for the phones this winter is having repercussions at the company’s suppliers across the globe.

Foxconn, the Chinese company that makes most of the company’s iPhones, will cut workers’ hours over the week-long Lunar New Year holiday and not offer overtime, a person familiar with the company’s plans told Reuters on Wednesday. That move led a provincial government to offer Foxconn more than $12 million to avoid layoffs late last month.

Typically, the Taiwan-based company, formally known as Hon Hai Precision Industry Co., offers the hundreds of thousands of people who work at its factories assembling iPhones and iPads incentives to work over the holiday, such as triple overtime pay.

But this year appears to be different, judging by Apple’s own predictions about the sales of its new phones, which are incremental updates of previous devices rather than a full-scale redesign.

In October, Apple head Tim Cook said that the company expected iPhone sales to increase in the first quarter of this fiscal year, which ended in December, compared to the same period a year earlier. He declined to give further projections about the new year leading some analysts to speculate that demand for the phones might be slipping.

Despite fears of declining phone sales, Apple had a busy holiday season, accounting for 49.1 percent of all new devices activated during the week leading up to Christmas, data from mobile analytics firm Flurry shows.

While that trend has consequences for investors, it may have a larger impact on workers at suppliers such as Foxconn, which has battled questions about poor working conditions and treatment of workers at factories across China, including a rash of suicides.

Last month, some workers at the company were let go on an early holiday break, even though the new-year holiday season — China’s biggest — doesn’t begin until February, the The Wall Street Journal reports. 

Foxconn denied the early holiday reports, according to StreetInsider.com.

In what appeared to be a response, the provincial government of Zhengzhou announced on Dec. 25 that it would grant Foxconn 81.9 million yuan ($12.6 million), calling it an “unemployment-insurance workforce-stabilization-subsidy,” according to the Journal.

The company has embarked on a rebranding effort in the wake of a series of investigations finding poor working conditions, long hours and overcrowded and poorly maintained dormitories at many of the company’s plants.

In April, Foxconn allowed a reporter from Recode to take a guided tour of the company’s factory in Shenzhen, in the south China province of Guangdong.

A year earlier, the facilities once again became the subject of debate after a young worker at the Shenzhen factory, who was also an aspiring writer, committed suicide, leaving behind a series of poems that described his experiences, which were widely shared on Chinese blogs after his death in September 2014.

“I stand like iron by the assembly line, my two hands flying/ How many days and how many nights/ I stand there like that, falling asleep,” wrote 24-year-old Xu Lizhi, who had worked on factory assembly lines on and off since 2010 to support himself.

During Recode’s tour, a company spokesman described the facilities available to workers – who can also live elsewhere – as akin to a college campus, noting that it had several swimming pools, Internet cafes, and restaurants. The company offers counseling services and a 24-hour hotline for workers suffering from depression.

But several facilities, including the counseling center and a company-run labor union, appeared nearly empty or immaculately polished, suggesting that they may be sparsely used, Recode’s Dawn Chmielewski wrote.

“We entered one first-floor room (without obtaining the occupants’ permission, according to our translator) where four roommates occupy identical metal bunk beds, with thin mattress and mosquito netting on top, and a desk and storage underneath,” she wrote, adding, “It’s hardly ornate, but it didn’t give off a scent of rot, either.”

The company’s decision to curtail workers’ schedules comes in the midst of a Chinese economy that is slowing generally, but the Japanese newspaper Nikkei reported on Wednesday that Apple is also expected to reduce its output of iPhone by 30 percent from January to March. The decision is part of a move to let dealers sell off their existing iPhone stock before buying new phones, the paper reported, citing several parts suppliers.

Foxconn said in a statement that it was “in the midst of planning operational schedules for the Lunar New Year holiday,” but didn’t provide details, according to Reuters. The factory in Zhengzhou, which employs 200,000 workers, primarily makes iPhones.

The company told the wire service that the incentives from the Zhengzhou government were to “recognize companies that provide stable employment in the province,” saying they were the result of the company’s large number of workers there in 2014. Apple did not respond to a request for comment from the Monitor.