Apple and others face shipping delays as the coronavirus in China puts pressure on suppliers

An employee arranges Apple iPhones as customers shop at an Apple Store on 5th Avenue shortly after new products go on sale in Manhattan, in New York City, New York, US March 18, 2022. REUTERS/Mike Segar

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SHANGHAI/TAIBIE (Reuters) – Shipments of some Apple products as well as Dell and Lenovo laptops are likely to face delays if China’s COVID-19 lockdowns continue, as restrictions force assemblers to close and closed-loop, analysts said. Arrangements are difficult to maintain.

China’s race to stem the spread of COVID-19 has jammed highways and ports, stranded workers and left countless factories waiting for government approval to reopen – disruptions spreading across global supply chains. Read more

Apple Inc supplier Pegatron Corp (4938.TW) said this week it will suspend its factories in Shanghai and Kunshan, which, according to supply chain experts, produce the iPhone 13, iPhone SE series and other outdated models. Read more

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Analysts said Quanta Computer Inc (2382.TW), which produces about three-quarters of Apple’s Macbooks globally, has also closed its operations, which could affect deliveries more severely. Read more

The ultimate impact on Apple’s supply chain is uncertain and depends on factors including how long the shutdowns will last.

Analysts said the company may also consider redirecting production from Shanghai and Kunshan to plants elsewhere, such as Shenzhen, that are not currently under shutdown.

“Apple may consider moving orders from Pegatron to Foxconn, but we expect volume to be limited due to logistics issues and the difficulty of adjusting equipment,” said Eddie Hahn of Taipei, senior analyst at Isaiah Research. Foxconn is the trading name of Hon Hai Precision Industry Co Ltd (2317.TW).

As a worst-case scenario, Hahn said, Pegatron could fall behind on 6 million to 10 million iPhone units if the shutdowns continued for two months and Apple was unable to forward orders.

Apple did not respond to a request for comment.

The CEOs of Huawei Technologies Co Ltd (HWT.UL) and Xpeng Inc (9868.HK) have announced huge economic costs if factories in Shanghai cannot resume production soon. Read more

Shanghai is approaching its third week of lockdown and has shown no sign of a large-scale reopening.

If the lockdown is lifted in a few weeks, there is still a chance of a recovery, Forrest Chen, director of research at Trendforce, told Reuters.

However, “if the shutdown lasts more than two months, there is really no way to recover. At that point, after the shutdowns, there will be a shortage of end users,” he said.

Some suppliers may be able to change the course of production.

Unimicron Technology Corp (3037.TW), which makes printed circuit boards for companies including Apple, told Reuters that the impact of the Kunshan shutdown so far was minimal and could count on other factories in Hubei province and Taiwan to support production.

But logistics and transportation remain a nationwide problem, with cities across China taking measures.

A factory owner in Kunshan told Reuters that the provincial government had announced a reopening protocol, but had not set a date for implementation.

Laptop makers may also suffer, including Compal Electronics Inc (2324.TW), a Taiwan-based company that makes computers for Dell Technologies Inc (DELL.N) and Lenovo Group Ltd (0992HK) from its plants in Kunshan. Chen estimates that nearly 50% of Compal’s laptop production is located in Kunshan.

Compal told Reuters on Friday that it had not halted production in Kunshan. Dell and Lenovo did not respond to emails seeking comment.

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Additional reporting by Josh Horowitz in Shanghai and Sarah Wu in Taipei; Editing by Sayantani Ghosh and Christopher Cushing

Our Standards: Thomson Reuters Trust Principles.

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