Pegatron had to put a halt to production in two of their factories in Shanghai. This stoppage is mainly due to the Covid lockdown restrictions that are affecting the city’s population of 25 million.
The Taiwanese electronics manufacturing company announced last Tuesday, April 19, that they will be suspending operations until further notice. The order has been enforced in their Shanghai factory and in Kunshan, which is just over 60km away.
Pegatron Corporation, one of Apple’s largest suppliers, promised to work with local officials to continue operations once the government announced the resumption date.
It is unclear which parts of the manufacturing operations are affected. The electronics company was allowed to operate in the Shanghai factory under a restricted loop system. The system intends to reduce the risks of infection in essential workers and other personnel involved. The government permitted the staff to work there until now.
Recent COVID outbreak affecting citizens and businesses
The Taiwanese manufacturing company is one of many companies affected by perhaps the largest Covid restrictions to date. The stoppage is due to the surge of infections in the recent coronavirus outbreak in China, considered the worst since the initial phase in early 2020.
Aside from that, this appears to be the result of China’s latest “zero-Covid” strategy.
During the coronavirus wave in March, Shanghai reached about 220,000 cases. As a result, the surge led to strict stay-at-home restrictions that affected many people and businesses.
Apple’s production disrupted
Apple (AAPL) was already dealing with disruptions in their supplies even before the announcement regarding Pegatron’s operations. In addition, Foxconn, another Apple supplier, had to suspend operations as well. The electronics company is located in Shenzhen and was affected by the lockdown in the north of Hong Kong.
According to Nikkei Asia, Pegatron assembles 20% to 30% of Apple’s iPhones, illustrating how the American multinational company is reliant on Chinese manufacturers. On top of that, supply chain issues were slowly starting to improve – then the unexpected disruption happened.
Be that as it may, shares of the company have closed up over 1%. This indicates that investors are not too concerned about the production crisis.
There is a prediction that June will be a “low point” regarding the demand for iPhones. However, investors anticipated the softness in the coming months and believe that the demand is transferable and not entirely destroyed.