Business related media thrived on this weekend’s alleged report of a second incident of labor unrest in less than two weeks, involving a Foxconn contract manufacturing facility. This time, the situation is reported to be at Foxconn’s Zhengzhou China facility which produces Apple iPhone 5 smartphones, among other products.

Conflicting reports indicate that more than 200 quality control employees were involved in a brief work stoppage in protest over high pressure working conditions. On Saturday, the China Labor Watch organization had reported that upwards of 3000- 4000 workers went on-strike at the facility, because of anger related to over-exacting quality controls as well as mandates to work through the week-long National Day holiday within China.  Foxconn denied any initial reports related to an outright work strike, but has acknowledged that large numbers of workers had resisted strict quality control requirements that involve the production of Apple’s iPhone 5. Foxconn further indicated in statements that workers who worked during the National Day holiday, did so voluntarily, and were compensated three times their usual wage compensation. A Financial Times published article quotes Foxconn as indicating: “The incident was triggered by an emotional stand-off between quality control personnel and production line workers.  After we addressed the issues, people on the (Friday) shift resumed work, and there was basically no impact on the production lines. “An NBC news report quotes an unnamed spokesperson for the industrial zone in Zhengzhou as indicating that an instruction to strengthen quality inspections was given by Apple following multiple complaints from customers regarding aesthetic flaws in phones. The facility employs upwards of 200,000 workers and is one of two production plants producing Apple’s latest smartphone.

This alleged second incident of Foxconn unrest is significant for two reasons.  First, Foxconn had shifted Apple production requirements to new plants located in the interior parts of China in response to previous incidents of worker suicides and labor unrest at plants in the Pearl River coastal region. These new incidents at interior plants call into question whether geography or strict work standards are the cause of continued labor unrest.

The second significance is that this latest incident is yet another indicator that Apple has potentially reached a constraint point in its assumption that a contract manufacturer has unlimited ability to ramp-up to Apple’s capacity demands without social responsibility implications. Apple can continue to hype consumer pent-up demand for iPhone’s but the implications of a “stressed” supply chain are becoming more visible with each passing day.

Bob Ferrari