Analysts note that new COVID-19 lockdowns in China are hitting Apple’s supply chain hard. And the pain will likely worsen, with production falling behind by up to 10 million iPhones.
And this is not just about iPhones. Authorities have halted production at three key suppliers for iPhone, iPad and Mac assembly. Meanwhile, Apple is negotiating to reopen production lines, though success could be hard to come by, according to one analyst Friday.
This follows recent news of assembly and shipping delays on built-to-order MacBook Pro models.
New COVID-19 lockdowns in China mess with Apple supply chain
Amid the global COVID-19 pandemic, many countries seek to mitigate the contagion’s impact without completely disrupting life. China, however, takes a more extreme stance. It aims to eradicate the disease within its borders by stopping its spread cold through repeated lockdowns.
That could stem, at least in part, from vaccines produced there falling short of the effectiveness of vaccines made elsewhere.
A Shenzhen lockdown last month forced Foxconn to halt iPhone assembly at two plants. However, between exemptions for closed-loop production and the company’s ability to switch to backup facilities, iPhone production didn’t take a terrible hit.
Since then, though, Apple product assembly has halted in facilities belonging to partners Pegatron, Quanta and Compal. Foxconn’s facility in Zhengzhou is still operating normally, with additional COVID-19 precautions. But that may not last.
Apple may be negotiating
TF Securities analyst Min-Chi Kuo tweeted Friday (see below) that Apple is attempting to negotiate to reopen production lines “next week at the earliest.” But success is hardly guaranteed, even if hope for a more successful outcome is the reason why the Apple supply chain has not seen significant order cuts.
(2/2) I'm not sure if Apple can succeed, but it may explain why Apple supply chain has not seen significant order cuts after the COVID lockdowns. In addition, the aggressive negotiation for the resumption of work also represents most Apple products have strong demand now.
— 郭明錤 (Ming-Chi Kuo) (@mingchikuo) April 15, 2022
But Reuters reported on analysts saying the situation will probably get worse.
Shipments of some Apple products, as well as Dell and Lenovo laptops, will probably face delays if lockdowns continue, analysts said. That will happen as curbs force assemblers to shut down and it becomes more difficult to maintain closed-loop arrangements.
An analyst referred to the worst-case scenario amid the rippling effects of lockdowns across supply chains. A delay of a couple of weeks is one thing. But a couple of months is much more serious.
“Apple may consider transferring the orders from Pegatron to Foxconn, but we expect the volume may be limited due to the logistics issue and the difficulty of equipment adjustment,” said Taipei-based Eddie Han, a senior analyst at Isaiah Research.
He added Pegatron may fall behind on 6 million to 10 million iPhone units if the lockdowns last two months and Apple can’t reroute orders.