Following an overall recovery effort in the past few weeks, Apple (NASDAQ:AAPL) briefly encountered trouble on Wednesday morning. AAPL stock started the session in the red before bouncing back slightly. Initially, a violent protest at the consumer technology stalwart’s key supplier Foxconn – which does business in China and Taiwan under Hon Hai Precision Industry (OTCMKTS:HNHPF) – erupted, bringing a slew of embarrassments for both enterprises.
According to a TechCrunch.com report, “[h]undreds of workers at the world’s largest iPhone plant in central China clashed with the police, according to videos shared over the last few days by Foxconn workers on Douyin and Kuaishou. Some videos showed workers breaking out of their dormitories and security personnel beating them.”
As the publication noted, this incident comes two weeks after Apple warned about production delays associated with China’s ongoing struggles to contain Covid-19. Beijing imposed a strict zero-Covid policy, sparking huge concerns about a wider economic slowdown.
For AAPL stock, the underlying business must do what it can to secure sales amid a weakening consumer economy. With multiple companies – particularly in the high-paying tech sector – announcing layoffs, enterprises like Apple may be operating on borrowed time.
In addition, the Foxconn protests put a glaring spotlight on worker conditions. Part of the reason for the unrest reportedly centers on lack of quarantine measures for Covid-infected workers. As well, demands on employees to run the production line despite Covid-19 outbreaks at the facility sparked anger.
A Public Relations Blight on AAPL Stock
Though Apple is no stranger to controversy, the Foxconn protests may hit a nerve with both consumers and investors. This latest incident is an unnecessary and unwanted for stakeholders of AAPL stock.
In particular, the Foxconn protests call attention to the manufacturing plant’s so-called closed loop system. According to Reuters, under such a framework, “staff live and work on site, isolated from the wider world.” Given the often-high cost of scandals, AAPL stock is guaranteed no exemptions.
If these matters weren’t distracting enough, there’s also the issue about production needs ahead of the holiday season. With video showing workers rushing out of the Foxconn factory, order may not be restored soon. Left to its extreme, Apple may suffer a severe supply constraint.
Certainly, a resolution does not appear imminent. “Give us our pay!” chanted workers according to the Reuters report. Another trigger for the Foxconn protests centers on delayed bonus payments. Unless Foxconn can get the situation under control, AAPL stock may be suspect over the next several sessions.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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