Apple may be missing its production target for its flagship iPhone 14 Pro models by nearly 6 million units worldwide, Bloomberg reported Monday, after workers at the world's largest iPhone factory in Zhengzhou, China protested over delayed bonus payments and poor living conditions. caused by China's strict Covid restrictions.

KEY FACTS

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According to Bloomberg, the exact size of the shortage remains unclear and will likely depend on the ability of manufacturer Foxconn to hire enough workers for the iPhone assembly line to keep up with production targets.

Earlier this month, Apple lowered its production target for the iPhone 14 by 3 million units due to Covid-related outages at the Foxconn factory, and that number has now been revised to double that, the report added.

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Workers at the Foxconn factory in Zhengzhou - sometimes referred to as "iPhone City" - were forced to live on-site in a sealed bubble and could only move from the factory to their dormitory rooms due to the city's Covid control measures.

While sales of the cheaper iPhone 14 and 14 Plus have slowed, the more expensive iPhone 14 Pro and Pro Max continue to maintain strong demand in the US, the report added.

While the company has diversified its production line by manufacturing some of its devices in India and Vietnam, almost all of its flagship iPhone 14 Pro models are made in the Zhengzhou factory.

Apple shares fell 1.87% in premarket trading on Monday morning following the report.

BIG NUMBER

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90 million. That was Apple's original target for the total number of iPhone 14-series devices Apple planned to make this year, Bloomberg reported.

BASIC QUOTE

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In an analyst note, investment firm Wedbush Securities said: “We estimate that Apple now has a significant shortage of iPhones, which could take about 5% of units this quarter and potentially as much as 10% depending on the next few weeks in China. Foxconn production and protests" The note added: "China's zero Covid policy has been an absolute blow to Apple's supply chain, as the Foxconn protests in Zhengzhou have been a black eye for both Apple and Foxconn."

NEWS PEG

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Anticipating disruption due to China's Covid measures, Apple issued a statement earlier this month warning of delivery delays for iPhone Pro models. The statement blamed "Covid-19 restrictions" for impacting production at the Foxconn factory and said customers trying to buy high-end models would face longer wait times. Currently, Apple's website shows a wait time of exactly one month for the iPhone 14 Pro or Pro Max.

KEY BACKGROUND

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Violent clashes broke out last week between security guards and Foxconn factory workers over delayed payments and poor living conditions. Several workers said they feared they would not receive promised bonus payments for joining the factory if they did not stay until March.

New recruits were lured by promises of higher wages and bonuses after hundreds of workers fled the factory campus in October, fearing the impact of strict Covid measures. Foxconn eventually apologized, blaming a "technical error" in its hiring process for the problems.

In an attempt to appease the angry recruits, the company offered 10,000 yen ($1,400) in compensation to those who wanted to leave the plant. According to Reuters, nearly 20,000 recruits took up Foxconn's offer, nearly 10% of iPhone City's 200,000 employees.

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