More than 30 Taiwanese companies including Pegatron and MacBook maker Quanta Computer have now halted production in the electronics hubs of eastern China to comply with local Covid-related restrictions, spelling more trouble for an already fragile global tech supply chain.
On Wednesday, Quanta said it was suspending a Shanghai plant to comply with government restrictions. At least 30 other companies are suspending output in nearby Kunshan until 19 April, they said in filings to Taiwan’s stock exchange. Some said the effect on their finances is still unknown, while others expect no major impact. Kunshan, a bustling city that hosts Apple suppliers including Pegatron and Luxshare Precision Industry, began a city-wide lockdown in early April.
The companies make parts for consumer electronics products ranging from PCs and smartphones, with many of the components critical for their global customers. The global supply of key tech has already been hobbled by China’s zero tolerance towards the virus and its measures to stamp it out in cities such as Shanghai and Kunshan.
On Tuesday, Pegatron suspended its iPhone assembly campuses in those two cities as China struggles to control the worst virus outbreak in two years. Other key Apple manufacturing partners including Luxshare and Compal Electronics also have major operations in Kunshan.
Widespread Chinese lockdowns have begun to exact an unquantifiable toll on the world’s second largest economy, the biggest buyer of semiconductors and the largest producer of electronics from iPhones to PCs.
Disruptions to local manufacturing are set to worsen the logistics hurdles of global companies already grappling with a shortage of cargo capacity that’s pushed shipping costs to record highs and a prolonged chip crunch. Gaming consoles, server computers and electric vehicles are among products facing further supply challenges.
Many of the most critical factories in Kunshan and Shanghai have managed to keep humming by operating so-called closed-loop systems that are quarantined from much of the outside world. But worsening logistics jams are constricting shipments of components, draining inventories to the point where some manufacturers including Pegatron and Quanta are down to just a few weeks’ stocks, Taipei-based consultancy TrendForce estimated.
Local officials on Wednesday placed two Kunshan districts with significant electronics manufacturing into lockdown for an indefinite period, while for certain other districts the lockdown was extended by seven days.
Some contract electronics makers have been unable to secure CPUs, battery modules and panels amid prolonged lockdowns, and certain manufacturers are facing a shortage of multilayer ceramic capacitors for servers and automotive products.
“The biggest problem for MLCC suppliers at this stage is they cannot deliver materials to Shanghai and Kunshan,” TrendForce said in a note on Tuesday. “Limited manpower and logistics and suspended transportation options mean [contract electronics makers] can only rely on onsite inventory to barely meet the needs of production lines, further exacerbating component mismatches.” — (c) 2022 Bloomberg LP