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Apple and others face shipping delays as China COVID limits suppliers – analysts

An employee arranges Apple iPhones as a customer shop at the Apple Store on 5th Avenue shortly after new products go on sale in Manhattan, in New York City, New York, U.S., March 18, 2022. REUTERS/Mike Segar

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SHANGHAI/TAIPEI, April 15 (Reuters) – Shipments of some Apple products, as well as Dell and Lenovo laptops, may face delays if China’s COVID-19 lockdowns persist, analysts said, as restrictions require assemblers to close and closed-loop arrangements become more difficult to maintain.

China’s race to stop the spread of COVID-19 has blocked highways and ports, locked down workers and left countless factories awaiting government approval to reopen – disruptions that are rippling through supply chains. global supply. Read more

Apple Inc’s supplier Pegatron Corp (4938.TW) announced this week that it will suspend its factories in Shanghai and Kunshan, where supply chain experts say it produces the iPhone 13, the iPhone SE series and other legacy models. Read more

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Quanta Computer Inc (2382.TW), which produces about three-quarters of Apple’s Macbooks worldwide, also shut down operations, which could have a more severe impact on shipments, analysts said. Read more

The ultimate impact on Apple’s supply chain is uncertain and depends on factors such as the duration of lockdowns.

The company could also consider rerouting production from Shanghai and Kunshan to factories elsewhere, such as Shenzhen, which is not currently under lockdown, analysts said.

“Apple may consider transferring orders from Pegatron to Foxconn, but we expect volume to be limited due to the logistics issue and difficulty in fitting equipment,” said Eddie Han, senior analyst. at Isaiah Research, based in Taipei. Foxconn is the trading name of Hon Hai Precision Industry Co Ltd (2317.TW).

In a worst-case scenario, Pegatron could fall behind 6 million to 10 million iPhone units if the lockdowns last two months and Apple can’t 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 signaled huge economic costs if factories in Shanghai cannot resume production soon. Read more

Shanghai is approaching its third week of lockdown and has shown no signs of a full-scale reopening.

Forrest Chen, director of research at Trendforce, told Reuters that if the lockdowns were lifted in a few weeks, there was still a chance to recover.

However, “if the lockdown lasts more than two months, there is already no way to recover. At this point, after the lockdown is lifted, there would be a shortage of end users,” he said. .

Some suppliers may be able to reroute production.

Unimicron Technology Corp (3037.TW), which makes circuit boards for companies including Apple, told Reuters the impact of Kunshan’s lockdown so far has been minor and it can rely on d ‘other factories in Hubei Province and Taiwan to support production.

But logistics and transportation remain a national issue as cities across China adopt measures.

A factory owner in Kunshan told Reuters the district government announced a reopening protocol but did not provide an implementation date.

Laptop makers could 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 factories in Kunshan. Chen estimates that about 50% of Compal’s notebook production is located in Kunshan.

Compal told Reuters on Friday it had not halted production at Kunshan. Dell and Lenovo did not respond to emails seeking comment.

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Reporting by Josh Horwitz in Shanghai and Sarah Wu in Taipei; Editing by Sayantani Ghosh and Christopher Cushing

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