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World

China state media plays down COVID wave severity before WHO meet

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  • State media says severe illness from COVID is rare
  • Chinese scientists expected to brief WHO
  • China factory activity shrinks in December

BEIJING, Jan 3 (Reuters) – China’s state media played down the severity on Tuesday of the COVID-19 wave surging over the country, with its scientists expected to give a briefing to the World Health Organization on the evolution of the virus later in the day.

China’s abrupt U-turn on COVID controls on Dec. 7, as well as the accuracy of its case and mortality data, have come under increasing scrutiny at home and overseas and prompted some countries to impose travel curbs.

The policy shift followed protests over the “zero COVID” approach championed by President Xi Jinping, marking the strongest show of public defiance in his decade-old presidency and coinciding with the slowest growth in China in nearly half a century.

As the virus spreads unchecked, funeral parlours report a spike in demand for their services and international health experts predict at least one million deaths in the world’s most populous country this year.

China reported three new COVID deaths for Monday, up from one for Sunday. Its official death toll since the pandemic began now stands at 5,253.

In an article on Tuesday, People’s Daily, the official newspaper of the Communist Party, cited several Chinese experts as saying the illness caused by the virus was relatively mild for most people.

“Severe and critical illnesses account for 3% to 4% of infected patients currently admitted to designated hospitals in Beijing,” Tong Zhaohui, Vice President of Beijing Chaoyang Hospital, told the newspaper.

Kang Yan, head of West China Tianfu Hospital of Sichuan University, said that in the past three weeks, a total of 46 critically ill patients have been admitted to intensive care units, accounting for about 1% of symptomatic infections.

More than 80% of those living in the southwestern Sichuan province have been infected, local health authorities said.

The World Health Organization on Friday urged China’s health officials to regularly share specific and real-time information on the COVID situation.

The agency has invited Chinese scientists to present detailed data on viral sequencing at a meeting of a technical advisory group scheduled for Tuesday. It has also asked China to share data on hospitalizations, deaths and vaccinations.

The European Union has offered free COVID vaccines to China to help contain the outbreak, the Financial Times reported on Tuesday.

EU government health officials will hold talks on Wednesday on a coordinated response to China’s outbreak, the Swedish EU presidency said on Monday.

The United States, France, Australia, India and others will require mandatory COVID tests on travellers from China, while Belgium said it will test wastewater from planes from China for new COVID variants.

China has rejected criticism of its COVID data and said any new mutations may be more infectious but less harmful.

“According to the political logic of some people in Europe and the United States, whether China opens or does not open is equally the wrong thing to do,” state-run CCTV said in a commentary late on Monday.

ECONOMIC CONCERNS

As Chinese workers and shoppers are falling ill, concerns mount about growth prospects in the world’s second-largest economy, weighing on Asian stocks.

Data on Tuesday showed China’s factory activity shrank at a sharper pace in December as the COVID wave disrupted production and hurt demand.

December shipments from Foxconn’s (2317.TW) Zhengzhou iPhone plant, disrupted late last year by a COVID outbreak that prompted worker departures and unrest, were 90% of the firm’s initial plans, a source with direct knowledge of the matter said.

A “bushfire” of infections in China in coming months is likely to hurt its economy this year and drag on global growth, said the head of the International Monetary Fund, Kristalina Georgieva.

“China is entering the most dangerous weeks of the pandemic,” warned analysts at Capital Economics.

“The authorities are making almost no efforts now to slow the spread of infections and, with the migration ahead of Lunar New Year getting started, any parts of the country not currently in a major COVID wave will be soon.”

Mobility data suggested that economic activity was depressed nationwide and would likely remain so until the infection wave began to subside, they added.

China’s Ministry of Culture and Tourism said the domestic tourism market saw 52.71 million trips during the New Year holiday, flat year-on-year and only 43% of the 2019 levels, before the pandemic.

The revenue generated was over 26.52 billion yuan ($3.84 billion), up 4% year-on-year but only about 35% of the revenue created in 2019, the ministry said.

Expectations are higher for China’s biggest holiday, the Lunar New Year, later this month, when some experts expect daily COVID cases to have already peaked in many parts of the country. Some hotels in the southern tourist resort of Sanya are fully booked for the period, Chinese media reported.

Reporting by Beijing and Shanghai bureaus; Writing by Marius Zaharia; Editing by Raju Gopalakrishnan

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World

German car giants and Asian battery kings: a match made in Hungary

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  • German, Chinese and S.Koreans head to Hungary
  • They dominate auto investment and subsidies
  • Orban’s Hungary keen to court foreign business

BERLIN/BUDAPEST, Dec 13 (Reuters) – German automakers and Asian battery suppliers are getting together in Hungary in a multi-billion-dollar marriage of convenience to drive their electric ambitions.

The companies are flocking to central Europe, where Viktor Orban’s government is defying Western wariness of China and offering generous benefits to host foreign operations and stake Hungary’s claim as a global centre for electric vehicles (EVs).

Investment in the Hungarian auto industry is being dominated by three countries – Germany, a champion carmaker, plus China and South Korea, EV battery leaders way ahead of European rivals.

Companies from those three countries have accounted for 29 out of the 31 cash subsidies handed out by Hungary for major investments in its auto and battery sector over the past decade, according to a Reuters analysis of government data that shows the scale of German, Chinese and Korean convergence there.

“Cathodes, anodes, separators, assembly lines, the full battery supply chain is here,” said Dirk Woelfer of the German-Hungarian Chamber of Commerce in Budapest. “This is a foot in the door to Europe.”

Recipients of such subsidies included the likes of German automakers BMW (BMWG.DE) and Mercedes-Benz (MBGn.DE), and battery makers such as China’s BYD and Korean rival Samsung SDI (006400.KS). The median subsidy level has been 15% of investment.

In total, Hungary has received over 14 billion euros ($15 billion) in foreign direct investment into its battery sector alone in the past six years, according to government figures.

Major investments are broadly classed as those worth over 5-10 million euros, varying with factors such as jobs created.

State incentives and the opportunity for automakers and battery suppliers to work next door to each other is proving a strong pull, according to interviews with about 20 industry players and consultants in Germany, Hungary, China and South Korea.

China’s CATL (300750.SZ), the world’s No. 1 EV battery maker, and Korean battery giants SK Innovation (096770.KS) and Samsung SDI, all told Reuters that the planned proximity to German carmakers was a key factor in their decisions to invest in Hungary, as well as being able to source separators and other components there.

CATL is investing $7.6 billion to build Europe’s largest battery plant in Hungary. This plant and the $2.1 billion BMW factory will both be sited in the city of Debrecen, which is attracting an ecosystem of suppliers, ranging from makers of brakes and battery cathodes to industrial machinery.

Mercedes-Benz is converting its factory in Kecskemet to produce electric cars, while Volkswagen’s (VOWG_p.DE) Audi is making cars and electric motors in Gyor.

Such big business could present a boon for Prime Minister Orban’s government as the country faces its toughest economic environment in more than a decade, with inflation running above 20%, the economy slowing and EU funds in limbo.

Yet the Hungarian EVs project also faces stiff obstacles, according to many of the industry insiders.

One key concern is the huge demands that massive battery plants will place on the electricity grid, which needs to shift away from fossil fuels towards renewables to meet the net-zero emissions targets of much of the auto industry, the people said.

A lack of specialised workers in Hungary to work in battery cell manufacturing could also drag on capacity, they added.

HIPA, the Hungarian Foreign Ministry agency responsible for attracting investments in areas ranging from batteries and cars to logistics, did not respond to Reuters queries about the EV industry.

‘CHINA’S MADE GOOD STEPS’

Hungary’s welcome to Asian battery makers might jar with concerns expressed by Brussels and Berlin about the perils of Europe becoming too dependent on China and other foreign powers, particularly in technologies central to the green transition.

Still, for now, the need to ramp up EV output leaves the European auto industry little choice but to source from Asian players, said Csaba Kilian of Hungary’s automotive association.

“I absolutely agree that European manufacturers should have their own sources … but it’s a competition, and China has made good steps,” he added. “There is a learning curve.”

Europe should have a EV battery manufacturing capacity of 1,200 gigawatt hours (GWh) by 2031 if current plans come to fruition, outstripping expected demand of 875 GWh, Benchmark Mineral Intelligence (BMI) estimates. But of that 1,200 GWh, 44% will be provided by Asian companies with factories in Europe, ahead of homegrown firms on 43% and U.S. pioneer Tesla (TSLA.O) with 13%, according to a Reuters calculation based on BMI data.

The prospects for developing a battery sector in Germany have been set back by record energy there as a result of the loss of Russian gas, according to autos consultants at Boston Consulting Group and Berylls Strategy Advisors.

Hungary offers a comparatively stable energy system bolstered by nuclear energy, as well as high subsidies and Europe’s lowest corporate tax rate of 9%.

The entire battery supply chain has come to the country, said Ilka von Dalwigk, policy manager at the European Battery Alliance, launched by the European Union in 2017 to kick-start a homegrown industry.

“Everything is located there. When we look at the forecast for 2025 and 2030, it looks like it will have one of the largest production capacities in Europe,” she added.

“It might very well be that Hungary is in fact the next big battery production cluster in Europe.”

Asked about concerns about reliance on Asia for technology, an EU official said the bloc – which must approve member state subsidies to investors – had a system in place to cooperate and exchange information on investments from non-EU countries that may affect security.

The European Commission is currently in talks with Hungary over the size of the subsidy the country will offer to CATL for building the Debrecen plant, the official added.

‘SENDING THE WRONG SIGNAL’

For some Western companies, setting up shop in Hungary is a tough decision.

German autos supplier Schaeffler said it was on the verge of setting up its primary electric motor plant in Hungary rather than Germany in August because of the appeal of Hungary’s incentives, but decided on Germany for fear of sending “the wrong signal” to Germans who fear a loss of jobs to overseas.

Other industry players expressed a range of concerns over potential pitfalls for the burgeoning Hungarian auto industry as factories ramped up, including the power grid issue.

Batteries, in particular, are highly energy-intensive parts of EVs to produce, requiring high amounts of power for the drying the materials and machine operation.

Hungary’s sources of energy in 2021 comprised 80% fossil fuels, 14.5% nuclear and 3.6% solar, according to a Reuters calculation of data from the BP Statistical Review of World Energy.

The mix spells trouble for carmakers who will soon need to showcase carbon-free credentials across their supply chains under new German and European legislation.

Hungarian Foreign Minister Peter Szijjarto met senior executives from BMW and auto suppliers including Schaeffler and Knorr-Bremse in Munich last month, ahead of the German carmaker announcing it was beefing up its investment in the country.

Topics discussed included plans to improve logistics infrastructure in Hungary and increasing the amount of renewables energy used for the power grid, according to one of the companies that attended.

When BMW first announced its plan to build its Debrecen plant, in 2018, the government committed to spending around 135 billion forints on improving local infrastructure, according to calculations by the German-Hungarian Chamber of Commerce.

On the battery side, CATL told Reuters it was considering developing solar power with local partners in Hungary.

Despite the risks, Alexander Timmer, a partner at Munich-based consultants Berylls Strategy Advisors who has worked on several autos and battery projects in Hungary, said the country presented an appealing package.

“The combination of cost advantages, state subsidies, and closeness to automakers’ plants makes Hungary increasingly attractive to battery producers, he added.

($1 = 397.54 forints; $1 = 0.9483 euros)

Reporting by Victoria Waldersee in Berlin, Gergely Szakacs in Budapest; Additional reporting by Heekyong Yang, Zhang Yan; Editing by Pravin Char

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Business

Foxconn’s woes to take bigger toll on giant China iPhone plant as more workers leave – source

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  • Foxconn Zhengzhou plant’s Nov shipments to fall further – source
  • Worker unhappiness at plant escalated into protests this week
  • Over 20,000 workers, mostly new recruits, have left – source

TAIPEI, Nov 25 (Reuters) – Foxconn’s (2317.TW) flagship iPhone plant in China is set to see its November shipments further reduced by the latest bout of worker unrest this week, a source with direct knowledge of the matter said on Friday, as thousands of employees left the site.

The company could now see more than 30% of the site’s November production affected, up from an internal estimate of up to 30% when the factory’s worker troubles started in late October, the source said.

The site, which is the only factory where Foxconn makes premium iPhone models, including the iPhone 14 Pro, is unlikely to resume full production by the end of this month, the source added.

The world’s largest Apple (AAPL.O) iPhone factory has been grappling with strict COVID-19 restrictions that have fuelled discontent among workers and disrupted production ahead of Christmas and January’s Lunar New Year holiday, as many workers were either put into isolation or fled the plant.

It has fuelled concerns over Apple’s ability to deliver products for the busy holiday period.

On Wednesday workers, most of whom were new recruits hired in recent weeks, clashed with security personnel at the Zhengzhou plant in central China.

Many claimed they were misled over compensation benefits at the factory, and others complained about sharing dormitories with colleagues who had tested positive for COVID.

Foxconn apologised for a pay-related “technical error” when hiring on Thursday, and later offered 10,000 yuan ($1,400) to protesting new recruits who agreed to resign and leave.

The source said more than 20,000 workers, mostly new hires not yet working on production lines, took the money and left. Videos posted on Chinese social media on Friday showed crowds and long lines of luggage-laden workers queuing for buses.

[1/2] The logo of Foxconn is seen outside the company’s building in Taipei, Taiwan November 10, 2022. REUTERS/Ann Wang

“It’s time to go home,” one person posted.

Foxconn, formally known as Hon Hai Precision Industry Co, declined to comment. Apple, which said on Thursday it had staff at the factory, did not immediately respond to a request for comment on Friday.

The plant, before its woes began, employed more than 200,000 staff. It has dormitories, restaurants, basketball courts and a football pitch across its sprawling roughly 1.4 million-square-metre (15 million-square-foot) facility.

Another Foxconn source familiar with the matter said some new hires had left the campus but did not elaborate on how many. This person said that because the people leaving had not yet been trained or begun to work, their departures would not cause further harm to current production.

“The incident has a big impact on our public image but little on our (current) capacity. Our current capacity is not affected,” the source said.

“There’s only so much corporate can do on pandemic prevention … It’s been a problem for a while. This is a problem faced by everyone,” the person said, pointing to other worker unrest triggered by rigid COVID restrictions, including upheaval at another Apple supplier, Quanta (2382.TW), in May.

Foxconn shares closed down 0.5%, lagging the broader market, (.TWII) which ended flat.

Hundreds of workers joined protests at Foxconn’s major iPhone plant China’s Zhengzhou this week, with some men smashing surveillance cameras and windows, footage uploaded on social media showed.

($1 = 7.1616 Chinese yuan renminbi)

Reporting By Yimou Lee; Additional reporting by Brenda Goh; Editing by Anne Marie Roantree, William Mallard and Gerry Doyle

Our Standards: The Thomson Reuters Trust Principles.

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Business

Foxconn apologises for pay-related error at China iPhone plant after worker unrest

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  • Foxconn says it is working with staff to resolve disputes
  • Major iPhone factory rocked by protests over pay, conditions
  • Apple says it has team on the ground in Zhengzhou

TAIPEI/SHANGHAI, Nov 24 (Reuters) – Foxconn (2317.TW) said on Thursday a pay-related “technical error” occurred when hiring new recruits at a COVID-hit iPhone factory in China and apologised to workers after the company was rocked by fresh labour unrest.

Men smashed surveillance cameras and clashed with security personnel as hundreds of workers protested at the world’s biggest iPhone plant in Zhengzhou city on Wednesday, in rare scenes of open dissent in China sparked by claims of overdue pay and frustration over severe COVID-19 restrictions.

Workers said on videos circulated on social media that they had been informed that the Apple Inc (AAPL.O) supplier intended to delay bonus payments. Some workers also complained they were forced to share dormitories with colleagues who had tested positive for COVID.

“Our team has been looking into the matter and discovered a technical error occurred during the onboarding process,” Foxconn said in a statement, referring to the hiring of new workers.

“We apologize for an input error in the computer system and guarantee that the actual pay is the same as agreed and the official recruitment posters.” It did not elaborate on the error.

The apology was an about-face from a day earlier when Foxconn said it had fulfilled its payment contracts.

The unrest comes at a time when China is logging record numbers of COVID-19 infections and grappling with more and more lockdowns that have fuelled frustration among citizens across the country. But it has also exposed communication problems and a mistrust of Foxconn management among some staff.

The largest protests had died down and the company was communicating with employees engaged in smaller protests, a Foxconn source familiar with the matter told Reuters on Thursday.

The person said the company had reached “initial agreements” with employees to resolve the dispute and production at the plant was continuing.

Mounting worker discontent over COVID outbreaks, strict quarantine rules and shortages of food had seen many employees flee the enclosed factory campus since October after management implemented a so-called closed-loop system that isolated the plant from the wider world.

Many of new recruits had been hired to replace the workers who had fled – estimated by some former staff to number thousands.

The Taiwanese company said it would respect the wishes of new recruits who wanted to resign and leave the factory campus, and would offer them “care subsidies”. The Foxconn source said the subsidies amounted to 10,000 yuan ($1,400) per worker.

APPLE RISKS

Home to over 200,000 workers, Foxconn’s Zhengzhou plant has dormitories, restaurants, basketball courts and a football pitch across its sprawling roughly 1.4 million square metre facility.

The factory makes Apple devices including the iPhone 14 Pro and Pro Max, and accounts for 70% of iPhone shipments globally.

Reuters Graphics Reuters Graphics

Apple said it had staff at the factory and was “working closely with Foxconn to ensure their employees’ concerns are addressed”.

Several shareholder activists told Reuters the protests showed the risks Apple faces through its reliance on manufacturing in China.

“The extreme dependence of Apple on China, both as a (consumer) market and as its place of primary manufacturing, we see that a very risky situation,” said Christina O’Connell, a senior manager for SumOfUs, a nonprofit corporate accountability group.

Reuters reported last month that iPhone output at the Zhengzhou factory could slump by as much as 30% in November and that Foxconn aimed to resume full production there by the second half of the month.

The Foxconn source familiar with the matter said it was not immediately clear how much impact the worker protests might have on production for November and that it might take a few days to work that out, citing the large size of the factory.

A separate source has said the unrest had made it certain that they would not be able to resume full production by month-end.

Reuters Graphics Reuters Graphics

Apple has warned it expects lower shipments of premium iPhone 14 models than previously anticipated.

Reuters Graphics

($1 = 7.1353 Chinese yuan)

Reporting by Yimou Lee in Taipei and Brenda Goh in Shanghai; Additional reporting by Ross Kerber in Boston, Beijing Newsroom and Yew Lun Tian; Editing by Anne Marie Roantree, Stephen Coates and Edwina Gibbs

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World

China widens COVID curbs, iPhone factory unrest adds to economy worries

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  • COVID restrictions ramped up as cases rise
  • iPhone factory unrest underscores industrial, social risks
  • Analysts warn of potential for wider lockdowns
  • Resort city Sanya imposes movement curbs on new arrivals

BEIJING, Nov 23 (Reuters) – Chinese cities imposed more curbs on Wednesday to rein in rising coronavirus cases, adding to investor worries about the economy, as fresh unrest at the world’s largest iPhone plant highlighted the social and industrial toll of China’s strict COVID-19 measures.

In Beijing, malls and parks were shut and once-bustling areas of the capital resembled ghost towns as authorities urged people to stay home.

The Hainan island resort city of Sanya barred people from going to restaurants and malls within three days of arrival, and numerous cities across China have imposed localised lockdowns as infections neared highs seen in April.

The measures are darkening the outlook for the world’s second-largest economy and dampening hopes that China would significantly ease its outlier COVID stance any time soon, as China faces its first winter battling the highly contagious Omicron variant.

“While there is little prospect of the authorities opting to step back from the zero-COVID policy during the winter, there is a significant risk that containment efforts fail,” analysts at Capital Economics wrote.

Such a failure could result in more lockdowns which would cause unprecedented damage to the economy, they said.

China’s COVID curbs, the tightest in the world, have fuelled widespread discontent and disrupted production at manufacturers including Taiwan’s Foxconn (2317.TW), Apple Inc’s biggest iPhone supplier.

On Wednesday, footage uploaded on social media showed Foxconn workers pulling down barriers and fighting with authorities in hazmat suits, chanting “give us our pay”. The unrest follows weeks of turmoil which has seen scores of employees leave the factory over COVID controls. The videos could not be immediately verified by Reuters.

Localities accounting for nearly one-fifth of China’s total GDP are under some form of lockdown or curbs, brokerage Nomura estimated earlier this week, a figure that would exceed the GDP of Britain.

TESTING RESOLVE

Even though infection numbers are low by global standards, China has stuck with its zero-COVID approach, a signature policy of President Xi Jinping that officials argue saves lives and prevents the medical system from being overwhelmed.

China reported 28,883 new domestically transmitted cases for Tuesday.

The International Monetary Fund urged China to further recalibrate its COVID-19 strategy and boost vaccination rates.

“Although the zero-COVID strategy has become nimbler over time, the combination of more contagious COVID variants and persistent gaps in vaccinations have led to the need for more frequent lockdowns, weighing on consumption and private investment,” IMF official Gita Gopinath said.

Residents are increasingly fed up with nearly three years of restrictions, and Wednesday’s protest at the Foxconn factory in Zhengzhou comes after crowds recently crashed through barriers and clashed with hazmat-suit-clad workers in the southern city of Guangzhou.

The rising case numbers are also testing China’s resolve to avoid one-size-fits-all measures such as mass lockdowns to curb outbreaks, and rely on recently tweaked COVID rules instead.

However, unofficial lockdowns have increased, including in residential buildings and compounds in Beijing, where case numbers hit a new high on Tuesday.

In Shanghai, a city of 25 million that was locked down for two months earlier this year, China’s top auto association said on Wednesday it would cancel the second day of the China Automotive Overseas Development Summit being held there over COVID concerns.

Chengdu, with 428 cases on Tuesday, became the latest city to announce mass testing.

Major manufacturing hubs Chongqing and Guangzhou have seen persistently high infection numbers, accounting for most of China’s caseload. Cases in Guangzhou fell slightly on Tuesday to 7,970 and authorities have said infections continue to be concentrated in key areas of Haizhu district.

Investors who last week were hopeful that China would ease restrictions have grown worried that the infection wave could slow economic reopening. read more Many analysts say a significant easing of COVID curbs is unlikely before March or April.

A sharper than expected slowdown in China, which is hurting domestic demand in particular, would reverberate across countries including Japan, South Korea and Australia, which export hundreds of billions of dollars worth of products and commodities to the world’s second largest economy.

Analysts are also cutting forecasts for oil demand from the world’s top crude importer, with recent COVID curbs already driving global oil futures lower.

“The next few weeks could be the worst in China since the early weeks of the pandemic both for the economy and the healthcare system,” said analysts at Capital Economics.

Reporting by Beijing and Shanghai newsrooms; Writing by Bernard Orr; Editing by Muralikumar Anantharaman, Miral Fahmy, Tony Munroe and Bernadette Baum

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Business

Stick-wielding men smash surveillance cameras at China iPhone plant

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SHANGHAI, Nov 23 (Reuters) – Men wielding sticks smashed surveillance cameras and windows at a massive campus owned by Apple (AAPL.O) supplier Foxconn (2317.TW) in the Chinese city of Zhengzhou, scenes broadcast live on the Kuaishou short video platform showed on Wednesday.

Hundreds of workers protested at the campus, home to the world’s largest iPhone factory, where many chanted “give us our pay”. They were surrounded by people in full hazmat suits, some carrying batons.

The images, which could not immediately be verified by Reuters, come after weeks of turmoil which have seen scores of employees flee the factory over COVID-19 controls.

Many former workers have spoken of food shortages and rigid quarantine rules, and Foxconn has had to offer incentives including bonuses to retain or lure workers. read more

Multiple people said on the livestream feeds they were protesting after being informed this week that they would receive their bonuses later than initially promised.

“Foxconn never treats humans as humans,” said one person in social media footage of the scenes.

Two sources with knowledge of the matter said there were protests at the Zhengzhou campus but declined to provide more details.

Foxconn and Apple did not immediately respond to a request for comment.

As of 0515 GMT, most of the footage had been taken down. Kuaishou did not respond to a request for comment.

Some videos showed people pulling down barriers set up to quarantine areas as part of China’s zero-COVID policy, or arguing with the hazmat-suited personnel.

Other videos showed workers complaining about the food they had been provided with while in quarantine or complaining that there were inadequate curbs in place to contain an outbreak.

Relentless controls and spot lockdowns across China have fuelled discontent across the country, hitting economic growth and escalating concerns over global supply chains as companies grapple to keep factories running as staff become infected.

Foxconn has maintained so-called closed-loop operations at the plant – a system in which staff live and work on-site isolated from the wider world – due to COVID outbreaks in Zhengzhou.

The curbs and discontent have hit production, prompting Apple to say earlier this month that it expected lower shipments of premium iPhone 14 models.

Foxconn, formally Hon Hai Precision Industry Co Ltd, is Apple’s biggest iPhone maker, accounting for 70% of iPhone shipments globally. It makes most of the phones at the Zhengzhou plant where it employs about 200,000 people, though it has other smaller production sites in India and southern China.

Reporting by Brenda Goh and Beijing Newsroom; Additional reporting by David Kirton in Shenzhen and Yimou Lee in Taipei; Editing by Edmund Klamann and Edwina Gibbs

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World

EXCLUSIVE U.S. blocks more than 1,000 solar shipments over Chinese slave labor concerns

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Nov 11 (Reuters) – More than 1,000 shipments of solar energy components worth hundreds of millions of dollars have piled up at U.S. ports since June under a new law banning imports from China’s Xinjiang region over concerns about slave labor, according to federal customs officials and industry sources.

The level of seizures, which has not previously been reported, reflects how a policy intended to heap pressure on Beijing over its Uyghur detention camps in Xinjiang risks slowing the Biden administration’s efforts to decarbonize the U.S. power sector to fight climate change.

U.S. Customs and Border Protection has seized 1,053 shipments of solar energy equipment between June 21, when the Uyghur Forced Labor Protection Act went into effect, and Oct. 25, it told Reuters in response to a public records request, adding none of the shipments have yet been released.

The agency would not reveal the manufacturers or confirm details about the quantity of solar equipment in the shipments, citing federal law that protects confidential trade secrets.

Three industry sources with knowledge of the matter, however, told Reuters the detained products include panels and polysilicon cells likely amounting to up to 1 gigawatt of capacity and primarily made by three Chinese manufacturers – Longi Green Energy Technology Co Ltd (601012.SS), Trina Solar Co Ltd (688599.SS) and JinkoSolar Holding Co (JKS.N).

Combined, Longi, Trina and Jinko typically account for up to a third of U.S. panel supplies. But the companies have halted new shipments to the United States over concerns additional cargoes will also be detained, the industry sources said.

The sources asked not to be named because they were not authorized to speak publicly on the matter.

China denies abuses in Xinjiang. Beijing initially denied the existence of any detention camps, but then later admitted it had set up “vocational training centers” necessary to curb what it said was terrorism, separatism and religious radicalism in Xinjiang.

Chinese foreign ministry spokesperson Zhao Lijian told a regular news briefing on Friday that claims about the use of forced labor in Xinjiang were “the lie of the century fabricated by a small group of anti-China individuals” and would hinder the global response to climate change.

“The U.S. side should immediately stop the unreasonable suppression of China’s photovoltaic enterprises and release the seized solar panel components as fast as possible,” he said.

In an email, Jinko said it is working with CBP on documentation proving its supplies are not linked to forced labor and is “confident the shipments will be admitted.”

Longi and Trina did not respond to requests for comment.

The bottleneck is a challenge to U.S. solar development at a time the Biden administration is seeking to decarbonize the U.S. economy and implement the Inflation Reduction Act (IRA), a new law that encourages clean energy technologies to combat climate change.

Solar installations in the United States slowed by 23% in the third quarter, and nearly 23 gigawatts of solar projects are delayed, largely due to an inability to obtain panels, according to the American Clean Power Association trade group.

ACP urged the Biden administration to streamline the vetting process for imports.

“After more than four months of solar panels being reviewed under UFLPA, none have been rejected and instead they remain stuck in limbo with no end in sight,” it said in a statement.

The UFLPA essentially presumes that all goods from Xinjiang are made with forced labor and requires producers to show sourcing documentation of imported equipment back to the raw material to prove otherwise before imports can be cleared.

CBP would not comment on the length of the detainments or say when they might be released or rejected. “Ultimately, it is contingent upon how quickly an importer is able to submit sufficient documentation,” CBP spokesperson Rhonda Lawson said.

Longi, Trina and Jinko source most of their polysilicon from U.S. and European suppliers such as Hemlock Semiconductor, a Michigan-based joint venture between Corning Inc and Shin-Etsu Handotai Co Ltd, and Germany’s Wacker Chemie, the industry sources said.

A Wacker spokesperson would not comment on the U.S. detainments but said the company sources quartzite from suppliers in Norway, Spain and France.

“Our procurement strategy gives us every reason to be confident that the products used in our supply chain are made in a manner that respects human rights,” spokesperson Christof Bachmair said.

Hemlock said in a statement that it sources all metallurgical-grade silicon from suppliers using quartz mined in North and South America.

CBP has previously said that it had detained about 1,700 shipments worth $516.3 million under UFLPA through September but has never before detailed how many of those shipments contained solar equipment.

The EU has also proposed a ban on products from Xinjiang but has not implemented one.

Reporting by Nichola Groom; Additional reporting by Eduardo Baptista in Beijing and David Stanway in Shanghai; Editing by Richard Valdmanis, Lisa Shumaker, Lincoln Feast and David Evans

Our Standards: The Thomson Reuters Trust Principles.

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World

China’s COVID epicentre shifts to Guangzhou as outbreaks widen

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  • Southern manufacturing hub fighting worst COVID-19 flare-up
  • Cases double in Zhengzhou, production base for Apple supplier
  • Chinese stocks, currency slip over virus fears

BEIJING, Nov 8 (Reuters) – New coronavirus cases surged in Guangzhou and other Chinese cities, official data showed on Tuesday, with the global manufacturing hub becoming China’s latest COVID-19 epicentre and testing the city’s ability to avoid a Shanghai-style lockdown.

Nationwide, new locally transmitted infections climbed to 7,475 on Nov. 7, according to China’s health authority, up from 5,496 the day before and the highest since May 1. Guangzhou accounted for nearly a third of the new infections.

The increase was modest by global standards but significant for China, where outbreaks are to be quickly tackled when they surface under its zero-COVID policy. Economically vital cities, including the capital Beijing, are demanding more PCR tests for residents and locking down neighbourhoods and even districts in some cases.

The sharp rebound will test China’s ability to keep its COVID measures surgical and targeted, and could dampen investors’ hopes that the world’s second-largest economy could ease curbs and restrictions soon.

“We are seeing a game between rising voices for loosening controls and rapid spreading of COVID cases,” said Nie Wen, a Shanghai-based economist at Hwabao Trust.

Considering how the nationwide COVID curbs are crushing domestic consumption, Nie said he had downgraded his fourth-quarter economic growth forecast to around 3.5% from 4%-4.5%. The economy grew 3.9% in July-September.

The rising case load dragged on China’s stock markets on Tuesday, but shares have not yet surrendered last week’s big gains.

Investors see China’s beaten-down markets as an attractive prospect as a global slowdown looms, and have focused on small clues of gradual change – such as more targeted lockdowns and progress on vaccination rates.

“No matter how harsh the letter of the law is…there is a little bit more loosening,” said Damien Boey, chief macro strategist at Australian investment bank Barrenjoey.

NO FULL LOCKDOWN YET

Guangzhou, capital of Guangdong province, reported 2,377 new local cases for Nov. 7, up from 1,971 the previous day. It was a dramatic jump from double-digit increases two weeks ago.

Surging case numbers in the sprawling southern city, dubbed the “factory floor of the world”, means Guangzhou has surpassed the northern Inner Mongolia city of Hohhot to become China’s COVID epicentre, in its most serious outbreak ever.

Many of Guangzhou’s districts, including central Haizhu, have imposed varying levels of curbs and lockdowns. But, so far, the city has not imposed a blanket lockdown like the one in Shanghai earlier this year.

Shanghai, currently not facing a COVID resurgence, went into a lockdown in April and May after reporting several thousand new infections daily in the last week of March.

“We have been working from home for the past couple of days,” said Aaron Xu, who runs a company in Guangzhou.

“Only a few compounds have been locked up so far. Mostly we are seeing disruptions in the form of public transit services being suspended and compound security barring couriers and food delivery. And we have to do PCR tests every day.”

RISING CASES

In Beijing, authorities detected 64 new local infections, a small uptick relative to Guangzhou and Zhengzhou, but enough to spark a new burst of PCR tests for many of its residents and a lockdown of more buildings and neighbourhoods.

“The lockdown situation has continued to deteriorate quickly across the country over the past week, with our in-house China COVID lockdown index rising to 12.2% of China’s total GDP from 9.5% last Monday,” Nomura wrote in a note on Monday.

Zhengzhou, capital of central Henan province and a major production base for Apple (AAPL.O) supplier Foxconn (2317.TW), reported 733 new local cases for Nov. 7, more than doubling from a day earlier.

In the southwest metropolis of Chongqing, the city reported 281 new local cases, also more than doubling from 120 a day earlier.

In the coal-producing region of Inner Mongolia, the city of Hohhot reported 1,760 new local cases for Nov. 7, up from 1,013 a day earlier.

Reporting by Ryan Woo, Bernard Orr, Liz Lee and Jing Wang; Additional reporting by Josh Ye in Hong Kong and Tom Westbrook in Singapore; Editing by Raju Gopalakrishnan, Stephen Coates and Raissa Kasolowsky

Our Standards: The Thomson Reuters Trust Principles.

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Business

Apple warns of lower iPhone shipments as COVID curbs hobble China plant

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  • Apple expects lower shipments of iPhone 14 Pro and Pro Max
  • Apple says a China plant operating at sharply reduced capacity
  • Apple supplier Foxconn revises down Q4 outlook

TAIPEI, Nov 7 (Reuters) – Apple Inc (AAPL.O) expects lower shipments of premium iPhone 14 models than previously anticipated following a significant production cut at a virus-blighted plant in China, dampening its sales outlook for the busy year-end holiday season.

Demand for high-end smartphones assembled at Foxconn’s (2317.TW) Zhengzhou plant has helped Apple remain a bright spot in a technology sector battered by consumer spending cutbacks amid surging inflation and interest rates.

But the Cupertino, California-based vendor has fallen victim to China’s zero-COVID-19 policy, which has seen global firms including Canada Goose Holdings Inc (GOOS.TO), and Estee Lauder Companies Inc (EL.N) shut local stores and cut forecasts.

“The facility is currently operating at significantly reduced capacity,” Apple said on Sunday without detailing the scale of the reduction.

“We continue to see strong demand for iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated,” it said in a statement.

Reuters last month reported that iPhone output could slump as much as 30% in November at Foxconn’s Zhengzhou factory – one of the world’s biggest – due to COVID-19 restrictions.

The factory in central China, which employs about 200,000 people, has been rocked by discontent over stringent measures to curb the spread of COVID-19, with many workers fleeing the site.

Market researcher TrendForce last week cut its iPhone shipment forecast for October-December by 2 million to 3 million units, from 80 million, due to the factory’s troubles, adding its investigation found capacity utilisation rates around 70%.

Apple, which began selling its iPhone 14 range in September, said customers should expect longer waiting times.

“Anything that affects Apple’s production obviously affects their share price,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

“But this is part of a much deeper story – the uncertainty surrounding the future of the Chinese economy… These headlines are part of the ongoing saga as to whether there is any truth to the consistent rumours that authorities are discussing whether some of the measures will be lifted in the first quarter.”

China on Monday reported its highest number of new COVID-19 infections in six months, with disruption to the world’s second-largest economy spreading nationwide since October. At the weekend, health officials said they would stick with strict coronavirus curbs, disappointing investors hoping for easing.

Meanwhile, Apple expects to produce at least 3 million fewer iPhone 14 handsets this year than planned due to weak demand for lower-end models, Bloomberg News reported on Monday, citing people familiar with the plan.

The world’s most valuable firm, with a market capitalisation of $2.2 trillion, last month forecast October-December revenue growth would slow from the previous quarter’s 8% – though market watchers regarded that favourably in a battered sector.

“Given that Apple reported only two weeks ago with positive guidance, we think this points to the potential for a longer and more severe lockdown,” Credit Suisse analysts said, expecting iPhone sales to be pushed to later quarters than lost.

They estimated Apple’s revenue to rise 3% in the current quarter, with iPhone sales growing 2% to $73 billion.

Reuters Graphics

FOXCONN CUTS OUTLOOK

Taiwan’s Foxconn is the world’s largest contract electronics manufacturer and Apple’s biggest iPhone maker, accounting for 70% of shipments globally. It has iPhone production sites in India and southern China, but its biggest is in the city of Zhengzhou in the eastern Chinese province of Henan.

Local officials recently commented on cases of COVID-19 at the plant. Foxconn has declined to disclose the number of infections or comment on the conditions of those infected.

On Monday, it said it was working to resume full production at Zhengzhou as soon as possible. A person familiar with the matter told Reuters that Foxconn’s target is by the second half of November.

At the request of the local government, Foxconn said it would implement measures to curb the spread of COVID-19, including restricting employee movement to between their dormitory and factory area.

The manufacturer has also began a recruitment drive, offering workers who left the plant during Oct. 10 to Nov. 5 a one-off bonus of 500 yuan ($69) if they returned. It also advertised salaries of 30 yuan an hour, higher than the 17 to 23 yuan base salaries that some workers told Reuters they received.

The Zhengzhou Airport Economy Zone, which houses the iPhone factory, entered a seven-day lockdown on Wednesday with measures included barring residents from going out and only allowing access to approved vehicles. read more

Foxconn said the provincial government “has made it clear that it will, as always, fully support Foxconn”.

“Foxconn is now working with the government in concerted effort to stamp out the pandemic and resume production to its full capacity as quickly as possible.”

Having previously expressed “cautious optimism” in its fourth-quarter earnings guidance, Foxconn on Monday said it will “revise down” its outlook given events in Zhengzhou.

The fourth quarter is traditionally a hot season for Taiwanese technology companies as they race to supply smartphones, tablet computers and other electronics for the year-end holiday shopping period in Western markets.
Foxconn releases its third-quarter earnings results on Nov. 10.

The firm, formally Hon Hai Precision Industry Co Ltd, saw its share price fall 0.5% in Monday trade, versus a 1.5% rise in the benchmark index (.TWII).

($1 = 7.2135 Chinese yuan renminbi)

Reporting by Ben Blanchard and Sarah Wu in Taipei, Caroline Valetkevitch in New York and Jaiveer Shekhawat in Bengaluru; Additional reporting by Brenda Goh; Writing by Miyoung Kim; Editing by Daniel Wallis and Christopher Cushing

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Business

Fearing COVID, workers flee from Foxconn’s vast Chinese iPhone plant

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BEIJING, Oct 31 (Reuters) – After enduring days of lock-in at Foxconn’s vast facility in central China with 200,000 other workers, Yuan finally climbed the fences on Saturday night and escaped the complex, joining others fleeing what they feared was a widening COVID outbreak.

He walked through the night, keeping to a northerly route, towards his hometown of Hebi, every step taking him farther away from iPhone maker Foxconn’s (2317.TW) Zhengzhou plant, the Taiwan-based group’s largest in mainland China.

“There were so many people on the road,” Yuan told Reuters on Monday, declining to give his full name because of the matter’s sensitivity.

Since mid-October, Foxconn has been wrestling with a COVID-19 outbreak at its facility in Zhengzhou, the capital of Henan province in central China. Workers were locked in to stop the spread of the coronavirus to the outside word. Foxconn has repeatedly refrained from disclosing the case load.

“We were shut in on Oct. 14, and we had to do endless PCR tests, and after about 10 days, we had to wear N95 masks, and were given traditional Chinese medicine,” said Yuan.

Whenever a positive or suspected case was found at a production line, there would be a public broadcast, but work would continue, he told Reuters.

“People would be called away in the middle of work, and if they don’t show up the next day, that would mean they had been taken away,” Yuan said.

Around 20,000 workers had been put in quarantine on-site, Yuan had heard, but he could not be sure how many were infected, as management did not publicise that information.

China typically isolates vast numbers of people considered close or even potential contacts of an infected person.

The world’s second-largest economy continues to wage war on COVID with disruptive lockdowns, mass testing and quarantines while many other countries have chosen to live with the disease. read more

For companies with massive manufacturing campuses like Foxconn, that has meant keeping thousands of workers on-site in so-called “closed-loop” systems to keep their production lines running.

“Food for tens of thousands was merely left outside (of the quarantine buildings at the plant),” said a worker surnamed Li, 21.

Li, who is still at the plant, said she was planning to quit.

In a statement on Monday, Apple (AAPL.O) supplier Foxconn said that reports that 20,000 staff had been diagnosed with COVID were false.

On Sunday afternoon, the company told Reuters in an emailed statement that workers were allowed to leave if they chose to. read more

Foxconn did not immediately respond to a Reuters request on Monday for further comment.

‘NEVER GO BACK’

Disruptions from China’s zero-COVID policies to commerce and industry have widened in October as cases escalated. Apart from the Foxconn lockdown, the Shanghai Disney Resort was shut from Monday to comply with counter-epidemic requirements, with visitors still inside.

For Yuan, matters came to a head when he heard that a housing complex for workers near his plant had been cordoned off by security on Friday, and that the plant itself was to go under a curfew the next day.

In a panic, Yuan decided to leave the next day, joining streams of other escaping workers. It was not immediately clear if a curfew was eventually imposed.

By Sunday morning, Yuan had hiked to the banks of the Yellow River, the northern boundary of Zhengzhou, where he was stopped 50 km (30 miles) short of Hebi by authorities from the city of Xinxiang on the other side.

“I’ll never go back to Foxconn,” said Yuan, who has since been transported to Hebi and put under quarantine.

“Zhengzhou has put a chill in my heart.”

Reporting by Ryan Woo; Additional reporting by Beijing newsroom and Ziyi Tang; Editing by Christian Schmollinger

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