China’s race to stop the spread of COVID-19 has blocked highways and ports, stranded workers and left countless factories awaiting government approval to reopen
China’s race to stop the spread of COVID-19 has blocked highways and ports, stranded workers and left countless factories awaiting government approval to reopen
Shipments of some Apple products, as well as Dell and Lenovo laptops, are likely to be delayed if China’s COVID-19 lockdowns continue, analysts said, as curbs force assemblers to shut and closed-loop arrangements become more difficult to enforce.
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China’s race to stop the spread of COVID-19 has blocked highways and ports, stranded workers and left countless factories awaiting government approval to reopen — disruptions rippling through global supply chains.
Apple Inc. supplier Pegatron Corp. said this week it would suspend its factories in Shanghai and Kunshan, where it produces the iPhone 13, iPhone SE series and other legacy models, according to supply chain experts.
Quanta Computer Inc., which produces about three-quarters of Apple’s Macbooks worldwide, has also shut down operations, which could more severely affect deliveries, analysts said.
The ultimate impact on Apple’s supply chain is uncertain and depends on factors such as how long the lockdowns last.
The company may also consider diverting production from Shanghai and Kunshan to factories elsewhere, such as Shenzhen, which is currently open, analysts said.
“Apple may consider transferring orders from Pegatron to Foxconn, but we expect volume to be limited due to the logistical issue and the difficulty of customizing the equipment,” said Eddie Han of Taipei, senior analyst at Isaiah Research. . Foxconn is the trade name of Hon Hai Precision Industry Co. Ltd.
In the worst-case scenario, Pegatron could be left with 6 million to 10 million iPhone units if the lockdowns last for two months and Apple is unable to divert orders, Mr Han said.
Apple did not respond to a request for comment. The chief executives of Huawei Technologies Co Ltd. and Xpeng Inc. signal huge economic costs if factories in Shanghai cannot resume production soon.
Shanghai is approaching its third week of closing and has shown no sign of a wide reopening.
Forrest Chen, research manager at Trendforce, told Reuters that if the lockdowns are lifted in a few weeks, there is still a chance to recover.
“However, if the lockdown lasts longer than two months, there is already no way to recover. At that point, after the lockdown is lifted, there would be a shortage for end users,” he said.
Some suppliers may be able to divert production.
Unimicron Technology Corp., which makes circuit boards for companies including Apple, told Reuters the impact of the Kunshan lockdown has been minor so far and it can rely on other factories in Hubei province and Taiwan to support production.
But logistics and transportation remain a nationwide problem as cities across China take action.
A factory owner in Kunshan told Reuters the district government had announced a protocol for reopening but had not given a date for implementation.
Laptop manufacturers may also suffer, including Compal Electronics Inc., a Taiwan-based company that makes PCs for Dell Technologies Inc. and Lenovo Group Ltd. from its factories in Kunshan. Chen estimates that about 50% of Compal’s laptop production is located in Kunshan.
Compal told Reuters on Friday that it has not stopped production in Kunshan. Dell and Lenovo did not respond to emails requesting comment.