Apple Supplier Pegatron Takes Hit In China COVID Lockdown: Reports

Major assembler in Shanghai suspends production as mainland China faces its worst Covid outbreak since the pandemic began in 2020 – coming after the temporary closure of Foxconn facilities last month.

Pegatron – a Taiwanese company that assembles up to 30 percent of Apple iPhones - on Tuesday suspended production at its Chinese plants after a COVID-19 outbreak, according to multiple reports.

It’s another supply chain blow for the Cupertino, Calif.-based Apple, which saw a temporary work stop last month at Foxconn, a major Taiwan-based supplier. Foxconn was able to resume production at its China facilities with a closed-loop system and employees staying on site around the clock.

“The Pegatron closures throws gasoline on the raging fire which is the supply chain for Apple and other parts of the iPhone ecosystem,” Wedbush analyst Dan Ives told CNBC in an email. “This is not the news the bulls want to hear as this amplifies supply chain issues for iPhones just as Apple was seeing an improvement.

According to news service Nikkei, Pegatron’s only active iPhone manufacturing facilities are in Shanghai and Kunshan. Shanghai has been under a strict lockdown since late March and Kunshan has also taken strong measures to control the current outbreak of COVID-19.

In an email to CRN, a spokesperson from Pegatron wrote, “The date of factory resumption is to be advised by the local government. We are communicating with customers and vendors and actively cooperating with local government to resume the operations as soon as possible. Meanwhile, we are continuously evaluating business and financial impact.”

CRN has reached out to both Apple for comment.

Supply chain issues have rippled through multiple industries, especially in chip manufacturing. China forced a major shutdown at the beginning of the pandemic, forcing closures at some of the biggest suppliers for global companies.

Respected Apple analyst Ming-Chi Kuo with TF International Securities said on Twitter, “In the best-case scenario, complete resumption of production may not be possible until late April or early May.” Kuo also sounded the alarm on Apple making significantly fewer orders than anticipated for Apple’s new iPhone SE and its popular AirPods earphones. Nikkei reported in late March that sources said Apple planned to make 20 percent fewer iPhone SEs and would reduce AirPods production orders by more than 10 million units for 2022.

Pegatron has 8,223 employees at operations in Taiwan, China, India, Mexico and the U.S., according to its latest annual report. According to IDC, Apple shipped more than 235 million iPhones in 2021, a 15.9 percent increase year over year.