Apple, others face shipment delays as China COVID curbs squeeze suppliers - analysts

Unimicron Technology

15/04/2022 08:07

By Josh Horwitz and Sarah Wu
    SHANGHAI/TAIPEI, April 15 (Reuters) - 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
said, 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.  urn:newsml:reuters.com:*:nL5N2W62B4
    Apple Inc  AAPL.O  supplier Pegatron Corp  4938.TW  said
this week it would suspend 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.  urn:newsml:reuters.com:*:nL2N2WA0LD
    Quanta Computer Inc  2382.TW , which produces some
three-quarters of Apple's Macbooks globally, also shut
operations, which could impact delivers more severely, analysts
said.  urn:newsml:reuters.com:*:nL2N2WB06M
    The final impact on Apple's supply chain is uncertain and
depends on factors including how long lockdowns persist. 
    The company may also consider re-routing 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   2317.TW .
    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 Co Ltd  HWT.UL 
and Xpeng Inc  9868.HK  have flagged huge economic costs if
factories in Shanghai cannot resume production soon.
 urn:newsml:reuters.com:*:nL2N2WD043
    Shanghai is approaching its third week of lockdown and has
shown no sign of a wide re-opening.
    Forrest Chen, research manager at Trendforce told Reuters
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  3037.TW , which makes printed
circuit boards for companies including Apple, told Reuters 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 told Reuters that the district
government had announced protocol for re-opening but provided no
date for implementation. 
    Laptop makers may also suffer, including Compal Electronics
Inc  2324.TW , a Taiwan-based company that makes PCs for Dell
Technologies Inc  DELL.N  and Lenovo Group Ltd  0992.HK  from
its plants in Kunshan. Chen estimates that roughly 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.

 (Reporting by Josh Horwitz in Shanghai and Sarah Wu in Taipei;
Editing by Sayantani Ghosh and Christopher Cushing)
 ((Josh.Horwitz@thomsonreuters.com; +86 21 20830007;))