Analysts predict Apple and others will face shipment delays as Chinese COVID curbs squeeze suppliers

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Apple, Dell, and Lenovo laptops could face delays if China’s COVID-19 lockdown continues to force assemblers out of business and make it more difficult to maintain closed-loop supply chains, analysts say.

China’s race to stop the spread of COVID-19 has clogged highways and ports, stranded workers, and left countless factories awaiting government approval to reopen—disruptions that have rippled through global supply chains. Pegatron Corp., a supplier to Apple Inc, announced this week that it would close its plants in Shanghai and Kunshan, where the iPhone 13, the iPhone SE series, and other legacy models are made.

Analysts estimate that the closure of Quanta Computer Inc., which makes about three-quarters of all Apple Macbooks sold worldwide, will have an even greater impact on delivery times. The long-term impact on Apple’s supply chain is uncertain and depends on a variety of factors, including how long lockdowns continue.

There are rumblings that the company may look to shift production from Shanghai and Kunshan to facilities in Shenzhen, which are not currently in lockdown.

Isaiah Research’s senior analyst in Taipei, Eddie Han, says that while Apple may consider moving its orders from Pegatron to Foxconn, the volume will be limited due to logistical concerns and the difficulty of making the necessary adjustments to the equipment. Foxconn is a trademark of Hon Hai Precision Industry Co., Ltd.

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If the lockdowns continue for two months and Apple is unable to reroute orders, Pegatron may fall behind on 6 million to 10 million iPhone units, Han said.

A request for comment from Apple was not answered. Economic losses would be enormous if factories in Shanghai could not be restarted as soon as possible by Huawei and Xpeng’s top executives.

The lockdown in Shanghai has entered its third week with no sign of a wide reopening. According to Trendforce’s Forrest Chen, research manager, it is still possible to recover if lockdowns are lifted in the coming weeks. However, “there is already no way to recover if the lockdown lasts longer than two months.” He said that after lockdown lifts, there would be a shortage of end users.

A few suppliers may be able to reschedule production. Printed circuit board manufacturer Unimicron Technology Corp. said to Reuters that the Kunshan lockdown has had only a minor effect on production so far and that it can rely on other plants in Hubei province and Taiwan for backup. While local governments across China take action, logistics and transportation will remain a national issue.

According to a Kunshan factory owner who spoke with Reuters, the district government announced protocol for reopening but did not provide a date for implementation.

It’s possible that Compal Electronics Inc, which makes computers for Dell Technologies Inc and Lenovo Group Ltd from its plants in Kunshan, will also be affected. According to Chen’s estimate, approximately 50 percent of Compal’s laptop production is done in Kunshan.

It was confirmed by Compal to Reuters on Friday that there had been no interruption in Kunshan production. A request for comment from Dell and Lenovo was not answered by either company.

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