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5 million iPhones defective – returned to Foxconn for repair

The latest news from China show that Foxconn have received 5 million iPhones back for repair, due to sub standard chassis or faulty functions. The report was filed with the China Business Journal this weekend.

The Taiwan based manufacturer have received 5 million phones back on March 15 according to the unnamed source of the report.

Foxconn will have to spend around $32.40 on each defective iPhone, resulting in extra costs of 1 billion yuan or ‘about two-thirds of the integrated Digital Product Business Group (iDPBG)’s profits in 2012’. The iDPBG is a section of Foxconn that is responsible for manufacturing the iPhone.

The Global Times attempted to contact Liu Kun, a spokesperson for the companies mainland operations, but was unable to get a response.
A Foxconn factory in Shenzhen. The workers are only allowed to sit down if they perch on the seat

The unnamed source said the rejects were due to ‘outdated quality management amid a too-fast iDPBG expansion as a result of robust global demand for iPhones.’ Apple sold 47.8 million iPhones globally in the first quarter of fiscal 2013. This is a 29 percent increase year on year from 37 million.

Foxconn are continuing to grow in China, where the number of employees has doubled to 1.2 million from around 600,000 documented back in 2009.

Analysts are concerned that costs are being cut in the production of the iPhone, might may have led to the high level of returns to base. GlobalTimes CN say “But the labor-intensive Foxconn is experiencing continuous reductions in profit margins due to rising labor costs, which may lead the company to cut costs in materials, Wei Guangju, an analyst with Adfaith Management Consulting, told the Global Times Sunday.”

Kitguru says: Terry Gou, the president of Foxconn has already indicated that the company plan on replacing workers with 1 million robots by 2014, in order to increase company profitability.

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