Apple suppliers prioritized for restarting factories in Shanghai area


Apple Suppliers Inc.

AAPL -2.05%

are among companies given priority in local government efforts to restart factories in the Shanghai region as the US tech giant, facing supply constraints, warned that the resurgence of the pandemic in China could affect sales.

Covid-19 outbreaks have hit Shanghai and the neighboring provinces of Jiangsu and Zhejiang over the past month, a region with one of the highest concentrations of Apple’s major suppliers, according to the company’s supplier list. published last year.

In Shanghai, 31 companies run production facilities that supply Apple, while there are 79 in Jiangsu and seven in Zhejiang, according to the list.

As Shanghai was locked down and neighboring regions imposed strict Covid prevention measures, many suppliers halted production, with some halting for weeks.

As economic hardship grows from politics, China has pushed to resume plant operations in an effort that has so far been gradual and, at times, bumpy. In Kunshan, a city in Jiangsu about 30 miles west of Shanghai, the local government last week released a list that names several major Apple suppliers, including Luxshare Precision Industry Co. and Wistron. Corp.

as “Covid-free” companies, giving them priority to resume production.

Factory workers in Foshan, China, donned masks on site in February 2020. The resurgence of Covid-19 cases in the country has led some factories to create bubble-like environments to continue operating.


Photo:

alex plavevski / Shutterstock

China’s central government has pledged to help restart factories, including Taiwan-based manufacturers. “We will continue to work with the relevant authorities to actively help Taiwanese enterprises overcome the impact caused by the pandemic and help them resume production and operation as soon as possible,” Ma Xiaoguang, a spokesperson for the office, said on Wednesday. Chinese Taiwan Affairs Office. Many Apple suppliers are based in Taiwan.

The impact of regional disruptions on Apple depends on how quickly and broadly its suppliers can resume operations. The company warned on Thursday that supply constraints resulting in part from the pandemic disruptions would hurt revenue by up to $8 billion in the current quarter. Apple did not immediately respond to a request for comment.

Chief Executive Tim Cook said Thursday that Apple’s constraints were mostly centered around the Shanghai corridor. The company’s estimate of up to $8 billion in affected sales reflects the various ramp-ups needed to get production back up and running, he said.

“On a positive front, almost all affected final assembly plants have now restarted,” Mr Cook said. “We are also encouraged that the number of Covid cases that have been reported in Shanghai has decreased over the past few days.”

Beijing is rushing to test more than 20 million people as residents scramble for food supplies. The WSJ’s Jonathan Cheng shows what life is like in the capital and unpacks the likely ripple effects if officials cannot control the fast-spreading virus. Photo: Kevin Frayer/Getty Images

Apple’s supply chain constraints improved in the first three months of the year, Cook said. Bernstein Research analyst Toni Sacconaghi estimates the effect over the period hurt revenue by $1-2 billion, compared to $6-7 billion during the holiday shopping season over the three last months of 2021.

Due to uncertainties, Apple did not provide revenue guidance for the current quarter ending in June, although some analysts interpreted the company’s comments as indicating that sales would be flat from 81 billion. dollars from a year ago. Before Thursday, analysts on average had expected revenue to rise 6% to $86.4 billion, according to FactSet.

Some Apple suppliers have restarted factories in recent days in bubble-like environments where workers are kept inside or near factory premises and frequently tested for Covid. The model has become increasingly popular in China to continue manufacturing amid epidemics.

UniMicron technology Co.

, a major Taiwan-based printed circuit board supplier, said on Thursday it had resumed some production in Jiangsu. Earlier this month, UniMicron had restarted operations for a single day at one of its Kunshan subsidiaries when authorities asked it to stop work to comply with local Covid prevention policies, the agency said. society.

quantum computer Inc.,

a leading assembler of MacBooks also based in Taiwan, resumed some production at its Shanghai factory on April 15, the official Xinhua news agency reported last week. There, some 2,000 of more than 40,000 workers have returned to make products, including laptops for Apple. That number is expected to reach around 6,000 workers by the end of April, according to Xinhua, which quotes a factory manager. A Quanta spokeswoman declined to comment on the current status of the recovery.

Apple suppliers prioritized for restarting factories in Shanghai area

Strict lockdown policies aimed at curbing a Covid-19 outbreak in Shanghai emptied a roadway in late March.


Photo:

ALY SONG/REUTERS

The number of Covid-19 cases in Shanghai appears to have plateaued in recent days, and cases in Jiangsu are trending down. Chinese health authorities on Friday reported 10,463 new locally transmitted infections nationwide for the previous day, after adjusting for previously reported asymptomatic cases that later became symptomatic. Almost all of the new infections have been in Shanghai.

While the rise in the number of cases in Beijing has raised fears it faces a lockdown, Apple’s supply chain has limited exposure to the capital and neighboring regions. Eight companies that supply Apple maintain production facilities in and around Beijing, according to its list of suppliers.

Elsewhere in China, Foxconn Technology Group has maintained production at its largest iPhone assembly plant in the central city of Zhengzhou, even though the district where it is based has been under partial lockdown since April 15, the company said.

Foxconn also followed the bubble-like system, he said, keeping tens of thousands of workers and other staff in or around the plant. They are required to undergo regular Covid testing – at least 15 rounds have been completed – and Foxconn has set up 88 testing sites within its sprawling campus, he said.

The district government is helping Foxconn receive and ship needed materials and products, while imported components and materials must undergo Covid testing before they can be delivered to the factory, the company said. Foxconn is expected to release its first quarter results on May 12.

The extent of the fallout from the recent Covid outbreaks in China on the global electronics supply chain is becoming clearer as suppliers report their quarterly results.

Chipmaker STMicroelectronics NV lost two weeks of production at its plant in Shenzhen, southern China, in the first quarter due to a lockdown there, CEO Jean-Marc Chery said this week during a briefing. a call with investors.

Texas Instruments Inc.

cut its second-quarter revenue outlook by around 10%, citing logistical issues stemming from China’s Covid restrictions. The maker of analog semiconductors used in cars and electronics has been unable to ship products from its distribution centers to its customers’ factories in China, particularly those in the Shanghai area, he said on an earnings call this week.

Write to Yang Jie at [email protected]

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