China’s measures to stop the spread of Covid-19 have blocked highways and ports, blocked workers and left countless factories awaiting government approval for reopening – disruptions that are spreading through global supply chains.
An Apple supplier, Pegatron, said this week that it will suspend operations in factories in Shanghai and Kunshan, where, according to supply chain experts, it produces the iPhone 13, the iPhone SE series and other older models.
Quanta Computer, which produces about three-quarters of Apple’s Macbooks globally, has also shut down operations, which could worsen deliveries, analysts said.
The final impact on Apple’s supply chain is uncertain and depends on factors, including how long the blockages persist.
The company may also consider diverting production from Shanghai and Kunshan to factories elsewhere, such as the Shenzhen plant, which is not currently blocked, analysts said.
“Apple may consider transferring orders from Pegatron to Foxconn, but we expect volume to be limited due to logistical issues and difficulty adjusting equipment,” said Eddie Han, a senior analyst at Isaiah Research. Taipei.
Foxconn is the trade name of Hon Hai Precision Industry.
In the worst case, Pegatron could be left with production of 6 million to 10 million iPhones if the restrictions last two months and Apple will not be able to redirect orders, Han said. Apple did not respond to a request for comment.
Huawei Technologies and Xpeng CEOs have reported huge economic costs if factories in Shanghai are unable to resume production soon. Shanghai is approaching its third week of isolation and has shown no signs of a wide reopening.
Forrest Chen, a research manager at Trendforce, told Reuters that if the blockages were lifted in a few weeks, there was still a chance of recovery. However, “if the lockout lasts more than two months, there will be no way to recover the lost production. At that moment, after the quarantine was lifted, there would be a lack of end users “, he said.
Some suppliers may redirect production. Unimicron Technology, which produces printed circuit boards for companies, including Apple, told Reuters that the impact of the blockade on Kunshan has been minor so far and that it can rely on other factories in Hubei Province and Taiwan to support production.
But logistics and transportation remain a national issue as Chinese cities take new steps.
A factory owner in Kunshan told Reuters that the district government had announced a protocol for reopening, but did not provide a date for implementation. Laptop manufacturers may also suffer, including Compal Electronics, a Taiwanese company that produces computers for Dell Technologies and Lenovo Group at its factories in Kunshan.
Chen estimates that about 50% of Compal laptop production is in Kunshan. Compal told Reuters on Friday that it had not stopped production in Kunshan. Dell and Lenovo did not respond to comments requesting emails
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