iPhone Manufacturer, Taiwan's Pegatron Corp. Ceases Operations In China Due To COVID-19 Pandemic

JAKARTA - Taiwan's Pegatron Corp, which has been assembling iPhones for Apple Inc, announced on Tuesday, April 12 that it has suspended operations of their factories in Shanghai and Kunshan in China due to the Chinese government's strict COVID-19 protocol.

China has put Shanghai under a strict lockdown since late March and the neighboring province of Kunshan has also tightened restrictions to control the country's biggest COVID-19 outbreak since the coronavirus was discovered in late 2019 in the city of Wuhan.

Global companies, from phone makers to chipmakers, rely heavily on China and Southeast Asia for production and have diversified their supply chains in the wake of the pandemic that caused chaos.

According to the Taiwan Financial Supervisory Commission, as of April 7, a total of 161 listed Taiwanese companies reported that their operations in Shanghai and Kunshan had ceased, 41 of which were electronics companies.

"In a best-case scenario, a complete resumption of production may not be possible until late April or early May," said analyst Ming-Chi Kuo at TF International Securities. He added that Apple was able to minimize the impact because of its strong supply chain and relationships. with the Chinese government.

While Apple itself did not immediately respond to a request for comment on the termination of this operation.

According to data provider TrendForce, staffing, logistics, and transportation issues are forcing manufacturers to rely on available inventory, which barely meets production line needs and exacerbates component mismatches.

The surge in shipments and demand for materials after the lockdown is lifted could also clog customs authorities, and lead to potential shipping delays.

Demand for iPhones could also take a hit as consumers divert funds from cell phones and gadgets to daily necessities.

Pegatron said the resumption of work depended on whether the two factories were granted operating permits by the government.

The company said it would maintain close contact with customers and suppliers and "actively cooperate" with local governments to resume work as soon as possible.

The much larger Taiwanese company Foxconn, the world's largest maker of contract electronics, also assembles iPhones in China. Its operations in the southern city of Shenzhen were also disrupted last month by the COVID-19 outbreak there.