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Suppliers In China Are Being Squeezed By COVID Restrictions, Which Are Causing Delays For Apple And Others

Suppliers In China Are Being Squeezed By COVID Restrictions, Which Are Causing Delays For Apple And Others
Analysts predict that if China's COVID-19 lockdowns continue, shipments of some Apple goods, as well as Dell and Lenovo laptops, may be delayed, as assemblers are forced to shut down and closed-loop arrangements become more difficult to maintain.
China's race to contain COVID-19 has clogged highways and ports, stranded workers, and left countless enterprises waiting for government authorisation to reopen, causing worldwide supply chain delays.
Pegatron Corp , an Apple Inc supplier, announced this week that it would close its operations in Shanghai and Kunshan, where it produces the iPhone 13, iPhone SE series, and other legacy models, according to supply chain specialists.
Quanta Computer Inc, which manufactures around three-quarters of Apple's Macbooks worldwide, has also ceased operations, potentially affecting deliveries even more severely, according to analysts.
The long-term impact on Apple's supply chain is unknown, and it depends on a variety of circumstances, including how long the lockdowns last.
Analysts speculate that the corporation may explore relocating manufacturing from Shanghai and Kunshan to factories in other cities, including as Shenzhen, which is not currently under lockdown.
"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.
If the lockdowns persist two months and Apple is unable to reroute orders, Pegatron may fall behind on 6 million to 10 million iPhone devices, according to Han.
There was no comment on the issue available from Apple.
The CEOs of Huawei Technologies Co Ltd and Xpeng Inc have warned of massive economic repercussions if Shanghai factories do not resume operations soon.
Shanghai is in its third week under lockdown and shows no signs of reopening to the public.
If the lockdowns are lifted in a few weeks, Forrest Chen, research manager at Trendforce, told Reuters, there is still a possibility 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.
It's possible that some suppliers will be able to reroute output.
Unimicron Technology Corp, which develops printed circuit boards for businesses like Apple, told Reuters that the Kunshan lockdown has had a limited impact on output so far, and that it can rely on neighbouring operations in Hubei province and Taiwan to keep things running.
However, as cities across China take steps, logistics and transportation remain a national concern.
According to Reuters, the district authority in Kunshan declared reopening procedure but did not offer a timeframe for implementation.
Compal Electronics Inc, a Taiwanese business that builds PCs for Dell Technologies Inc and Lenovo Group Ltd from its Kunshan factories, may also be affected. According to Chen, Kunshan is home to nearly half of Compal's laptop output.
Compal told Reuters on Friday that production in Kunshan had not been interrupted. Dell and Lenovo did not respond to requests for comment via email.

Christopher J. Mitchell

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