Shipments of some Apple products, as well as Dell and Lenovo laptops are likely to face delays if China’s Covid-19 lockdowns persist, analysts say, as curbs force assemblers to shut down and closed-loop arrangements get harder to maintain.
China’s race to stop the spread of Covid-19 has jammed highways and ports, stranded workers and left countless factories awaiting government approval to reopen – disruptions that are rippling through global supply chains.
Apple supplier Pegatron Corp said this week it would suspend work at its plants in Shanghai and Kunshan, where according to supply chain experts it produces the iPhone 13, the iPhone SE series, and other legacy models.
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Quanta Computer, which produces some three-quarters of Apple’s Macbooks globally, also shut operations, which could impact deliveries more severely, analysts said.
The final impact on Apple’s supply chain is uncertain and depends on factors including how long the lockdowns persist.
The company may also consider rerouting production out of Shanghai and Kunshan to factories elsewhere, such as Shenzhen, which currently is not under lockdown, analysts said.
“Apple may consider transferring the orders from Pegatron to Foxconn, but we expect the volume may be limited due to the logistics issue and the difficulty of equipment adjustment,” said Taipei-based Eddie Han, a senior analyst at Isaiah Research. Foxconn is the trade name of Hon Hai Precision Industry Co Ltd.
As a worst-case scenario, Pegatron may fall behind on 6 million to 10 million iPhone units if the lockdowns last two months and Apple cannot reroute orders, Han said.
Apple did not respond to a request for comment.
The chief executives of Huawei Technologies and Xpeng have flagged huge economic costs if factories in Shanghai cannot resume production soon.
Shanghai is approaching its third week of lockdown and has shown no sign of a wide reopening.
Logistics and Transport Issues
Forrest Chen, research manager at Trendforce, said that if lockdowns lift 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 lockdown lifts, there would be a shortage for end-users,” he said.
Some suppliers may be able to re-route production.
Unimicron Technology Corp, which makes printed circuit boards for companies including Apple, said the impact of the Kunshan lockdown so far has been minor and that it can rely on other plants in the Hubei province and Taiwan to support production.
But logistics and transport remain a nationwide issue, as cities across China enact measures.
One factory owner in Kunshan said that the district government had announced a protocol for reopening but had provided no date for implementation.
Laptop makers may also suffer, including Compal Electronics, a Taiwan-based company that makes PCs for Dell Technologies and Lenovo Group from its plants in Kunshan. Chen estimates that roughly 50% of Compal’s laptop production is located in Kunshan.
- Reuters with additional editing by Sean O’Meara