Apple’s supply chain companies in China face major production disruptions as Chinese cities follow the country’s strict covid policies with full and partial lockdowns since late March to tackle a new wave of Covid-19 outbreaks. Although Shanghai and nearby cities have recently begun to assist manufacturers in resuming operations, analysts still expect major disruptions to Apple’s shipments.
Why it matters: China plays a vital role in Apple’s supply chain and its global shipments, with Chinese factories accounting for almost half of Apple’s total supply chain. iPhone shipments could fall behind by 6 to 10 million units, according to one analyst quoted by 9to5mac, an Apple daily news site. Meanwhile, expected arrival times for some iPad and Mac models have also been disturbed by weeks-long delays.
Details: Shanghai began a two-step city-wide lockdown on March 28 as daily new Covid cases broke 4,000. The harsh control measures soon spread to neighboring provinces of Jiangsu and Zhejiang. These eastern regions are key to China’s high-tech manufacturing sector, including carmaking, semiconductors, and electronics.
- Shanghai, its nearby Jiangsu province, and the southern province of Guangdong are home to more Apple supplier factories than anywhere else in the country, according to TechNode research on Apple’s supplier list. These three areas account for one-third of Apple’s total factories worldwide and 61% of China’s.
- At least 30 companies in Apple’s supply chain have factories in Shanghai, including Foxconn, a major assembler for Apple. Foxconn previously halted production at its iPhone assembly factory in Shenzhen on March 14 due to a lockdown in the southern city, before resuming production after one week.
- Quanta is another key supplier based in Shanghai, which produces the MacBook for Apple. The company told Nikkei Asia that it had stopped production to comply with the local government’s Covid-19 prevention measures, beginning in early April.
- Apple’s second-largest electronic manufacturing services company, Pegatron, has also paused operations in Shanghai and neighboring city, Kunshan, according to Ming-Chi Kuo, an analyst for Apple.
Context: Shanghai’s ongoing weeks-long lockdown has triggered severe cascading effects in various industries from automobile to semiconductor to e-commerce. The Shanghai municipal government encouraged several key industries to resume production on April 16. But manufacturers still expect delays in the future.
- On April 18, Shanghai released a whitelist of 666 companies of key industries to make sure they restart production as soon as possible. Auto manufacturers and suppliers account for more than a third of the list, followed by pharmaceutical companies, according to a “whitelist” created by the Ministry of Industry and Information Technology last week and seen by Chinese media Caixin.
- Following Shanghai’s footsteps, Suzhou also whitelisted 1,696 companies that play a key role in the region’s manufacturing supply chain to prepare to restart production, Foxconn was one of the companies on the list.