As Covid cases continue to rise in China, many big tech suppliers are having to close their factories or restrict the movement of their workers, something that could be a major headache for Apple this year as it than half of its Chinese suppliers are in and around the country. most affected region of the country.
A new analysis conducted by Nikkei Asia found that half of Apple’s top 200 suppliers are in the city of Shanghai, which is currently in the midst of a weeks-long lockdown under the direction of the Chinese government.
Shanghai is currently struggling with one of the biggest outbreaks of Covid cases that China has seen since the beginning of the Covid epidemic in 2019. Eliminate community transmission of the coronavirus that causes the disease.
This is worrying many industry leaders and analysts, as the number of factories that have been closed or operated at reduced capacity could quickly exacerbate the supply chain crisis that is producing shortages and price inflation around the world.
Chinese authorities are not oblivious to this threat, and this week factories were told they could begin reopening under a closed-loop production model, where factory workers remain isolated and do not interact with the surrounding community. According to the Guardian, workers at the Tesla factory, for example, were told that they should sleep on site instead of going home after the day was over.
TechRadar has reached out to Apple for comment on the Shanghai situation and supply chain concerns and will update this story if and when we receive a response from the company.
Apple’s supply chain has been resilient, but can it continue to resist?
While Apple isn’t the only major tech company impacted by factory closures in and around Shanghai, the fact that so many of its top suppliers are there can be especially troubling.
Nikkei Asia reports that more than 70 Apple suppliers have factories in neighboring Jiangsu province and most of them are in Kunshan and Suzhou, two cities geographically close to Shanghai. Another 30 suppliers are based in Shanghai and together they supply everything from printed circuit boards to batteries and include major manufacturers of products such as Pegatron.
“We think the impact is much more serious than the power outages last year as it involves a wider range of the supply chain,” said AU Optronics president, monitor supplier Paul Peng, speaking of the imposed consumption reductions. that the Chinese government mandated in September 2021. “The disruption is not for a single company or industry, it is a global supply chain incident that could lead to a supply chain disruption in the worst case scenario.”
Assuming production restarts in Shanghai and the surrounding areas without issue – a big if given the amount of Covid transmission in the region – it will still take time to restart production lines and get them running at full capacity.
The worst is the moment of interruption. It takes months for products like MacBooks and iPhones to be produced, tested, packaged and shipped to global markets in Europe and North America. Products that were supposed to hit store shelves during the November and December holiday season would normally start being made in the next few weeks. Interruption at this point in the cycle could lead to a lack of targets for the end of 2022.
“May and June will be crucial for many branded consumer electronics suppliers,” an executive at an HP supplier told Nikkei Asia. “If production does not increase in time for the goods to be shipped via ocean freight, there is a chance that they will miss the Christmas sales season in Europe and the US due to congestion at ports – unless they are shipped by air. , which is much more expensive.”
If Apple’s suppliers can resume production on time and ship their products on time, it could not only threaten holiday season inventories, but it could also threaten product launches due later this year, particularly the new iPhone 14. and the MacBook Air, which are the company’s main products.