Apple has trouble with the chain of product assembly factories in China

Pegatron is one of the largest supply partners of Apple. The contractor recently announced that it was forced to cut production of communications equipment and consumer electronics this quarter. The reason is that the company’s large assembly plants in Shanghai are being limited in operation by the Chinese government’s shutdown measures in response to the COVID-19 epidemic.

According to Ivan Lam, senior analyst at research firm Counterpoint, new iPhone models, including the iPhone SE 2022, will likely record a decrease in production in the second quarter due to supply chain disruptions.

Last month, Pegatron halted production at its major factories in Shanghai and Kunshan. To date, the factory in Con Son has reopened after the city lifted some disease control measures. However, activities in Shanghai are still limited.

According to SCMP, contractor Pegatron’s decision to cut output will cause Apple to continue to adjust its supply chain strategy in China. It is estimated that more than half of Apple’s 192 suppliers are located in China, including Foxconn, Pegatron, Quanta Computer, Wistron and Compal Electronics.

Shanghai is currently home to many factories from its manufacturing partners. Not long ago, Apple estimated that supply chain constraints could cost the company up to $8 billion in lost sales.

During the business results conference, CEO Tim Cook said that the company continues to find ways to optimize the supply chain. He confirmed that the main cause of the stress is the continuing semiconductor crisis and disruption related to COVID-19.

Quanta, Apple’s main MacBook manufacturing partner, had to suspend operations at factories in Shanghai, Chongqing, and Changshu due to local COVID-19 control measures.

Foxconn, Apple’s other major assembly partner, is also grappling with difficulties caused by COVID-19. Most of the company’s mainland factories continue to produce in a “closed bubble” state, meaning employees eat and sleep at the factory.

According to experts at Counterpoint Research, despite the recent disruptions in the supply chain in China, it is still difficult for Apple to shift its extensive supply chain network to other countries like India. This is due to the lack of skilled workers and governance risks in those countries.

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