The Covid-19 pandemic “freezes” iPhone component factories in China

Pegatron, Apple’s iPhone assembler, said it has suspended production in Shanghai and the nearby city of Kunshan amid strict Covid-19 containment measures, according to CNBC.

Shanghai authorities have imposed strict measures as mainland China is facing its worst Covid outbreak since the early stages of the pandemic in early 2020. The government, which began in late March, has threatened to disrupt global supply chains. This also shows the Apple giant the risks of being too dependent on the manufacturing process in China.

Many other electronics suppliers in Shanghai and Kunshan were also disrupted. These are the major electronics hubs in China, causing the technology supply chain ecosystem to be directly affected. A new wave of Covid-19 spread is also spreading to Suzhou, Jiangsu province – home to another important cluster of electronics suppliers.

It is known that Pegatron assembles about 20% to 30% of all iPhones, Nikkei Asia reported. Previously, this Taiwanese company was still able to produce because the Chinese government allowed some manufacturers to maintain operations through a closed system to reduce the risk of infection, Bloomberg reported.

Wedbush analyst Dan Ives told CNBC in an email: “The closure of the Pegatron plant adds fuel to the fire as shortages worsen day by day. Pegatron is the main supply chain for Apple and other parts of the iPhone ecosystem. This move from Pegatron amplifies supply chain problems for Apple.”

Quanta, the world’s largest contract laptop factory and a place to assemble MacBooks, also confirmed that it has suspended operations at its main production site in Songjiang, Shanghai since early April because of Covid-19. Meanwhile, Compal Electronics, the iPad manufacturing partner, also stopped operations in Con Son.

Shares of Apple closed in this still more than up more than 1%, showing that investors are not concerned about reports of a production shutdown.

Last month, Foxconn, Apple’s largest iPhone manufacturing partner, announced the closure of factories in Longhua and Guanlan in Shenzhen due to the outbreak. Two days later, the factory was reopened after committing to a closed process of the local government.

Foxconn at the time said it would relocate production to other locations to minimize the impact. According to a study by Bank of America, nearly 50% of iPhones are manufactured at a factory in Ha Nam province. But Pegatron’s only active iPhone production facilities are in Shanghai and Kunshan, according to Nikkei. According to reports, their new iPhone assembly plant in India has yet to start operations.

Luxshare Precision Industry, the iPhone assembly plant in Con Son, continues to operate under government supervision. Workers have to stay at the company in a closed cycle to fight the epidemic.

The closure of these factories is assessed to directly affect the delivery time of Apple, especially MacBooks.