An analysis of Nikkei Asia finds that half of Apple’s 200 largest suppliers have facilities in and around Shanghai, where Covid-19-related shutdowns and traffic restrictions are disrupting a range of businesses.
More than 70 companies have factories in Jiangsu province that directly supply the US technology group, according to an analysis of the latest available Apple supplier list. The vast majority of these are in Kunshan and Suzhou, two cities near Shanghai. 30 or so Apple suppliers have facilities in Shanghai itself, the latest hotspot for the Covid boom in China.
These suppliers range from major iPhone maker Pegatron and iPad maker Compal Electronics to makers of components such as displays, printed circuit boards, thermal parts, batteries and audio components.
The supplier list is typically released each year and covers 98 percent of Apple’s spending on materials, manufacturing, and assembly of its products. The 2021 issue highlights how Shanghai’s financial center has also become important to global technology and automotive supply chains.
Moreover, most of these suppliers serve not only Apple, but also other global technology giants, including Google, Microsoft and Intel, as well as domestic suppliers, such as Huawei, Xiaomi and Oppo.
Foreign and domestic companies have warned that prolonged shutdowns could jeopardize China’s economic growth and deal a major blow to the auto and technology industries.
Chinese authorities have noticed. Vice Premier Liu He said this month that the country will stabilize industrial development and supply chains, and instructed local governments not to impede transportation for key logistics.
Local governments in Shanghai and Suzhou also put hundreds of major electronics, auto and medical suppliers on the so-called whitelist and said they would be able to gradually resume some manufacturing and logistics activities. But China is officially committed to a zero Covid policy, and many suppliers with production facilities in the region fear it will take months to resume normal operations.
Paul Ping, president of AU Optronics (AUO), a maker of home displays, said, referring to government-imposed electricity rationing in the region in September last year. “The disruption is not for a single company or industry, it’s a global supply chain accident that could cut the supply chain off in the worst case scenario,” he added.
AUO, which supplies HP, Dell, Asus and Tesla, operates production facilities in Kunshan and Suzhou. Ping said it would take “at least another quarter” before normal production could resume. There is a serious shortage of some basic materials such as cardboard boxes. Truck drivers who transport all the materials and components are also in huge shortages.”
Delta Electronics, a leader in power management solutions, has been whitelisted for Suzhou, but it could still see its production drop 20 percent in April in a worst-case scenario.
“The situation in May and June should improve enough to offset the impact in April, but it will depend on the progress of resuming production for suppliers across the greater Suzhou region,” said Cheng Ping, CEO.
A source in a Japanese electronics component supplier to Apple told Nikkei that its facilities in Suzhou have halted operations due to serious logistical issues in Suzhou and Shanghai. The source added that the suppliers of its materials and components have stopped production.
Meanwhile, Shanghai’s ports and airports are operating under strict Covid-related traffic controls and restrictions, creating enormous challenges for businesses, according to multiple logistics providers and suppliers.
“Logistics in the Yangtze River Delta, including Shanghai, Suzhou, Kunshan and Taikang to Wuxi is basically stagnant. Even if people can travel with permits, it will be so [difficult] To arrange a sufficient number of trucks,” said one of the managers at a Nikkei logistics company.
Some are already warning that the current chaos could affect this year’s holiday shopping season.
“May and June will be crucial for many sellers of consumer electronics brands. If production is not ramped up in time to ship goods via ocean freight, there is a chance they will miss the Christmas holiday sales season in Europe and the United States due to congestion in ports – unless shipping is done by Air way, which is much more than that,” said one of the executives at an important HP supplier.
The shutdowns will not only affect supply and production, but also demand, said Evan Lamm, an analyst at Counterpoint Research.
This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, economics, business and international affairs. Our reporters and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the largest and fastest growing listed companies from 11 economies outside Japan.
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“China is likely to continue its policies of non-proliferation of coronavirus, as the vaccination rate among the elderly is very low,” Lam said. On the demand side, we see a significant slowdown in consumer spending in China since the shutdown in Shenzhen earlier this year. It’s possible that we can further review down a few percentage points again for this year’s smartphone market outlook.”
Apple did not respond to a request for comment.
a A copy of this article It was first published by Nikkei Asia on April 20th. Copyright © 2022 Nikkei Inc. all rights are save.