Apple's foundry stops production! Global supply chain is impacted

​Recently, a new wave of epidemics brought by Omicron has caused widespread disruptions to manufacturing activities in the Yangtze River Delta region.

Several key Apple suppliers have stopped production

For Apple, several key suppliers have suspended production in Shanghai and Kunshan.

On April 12, major assembler Pegatron said it had halted operations at two of its factories in Shanghai and Kunshan.

This is also Pegatron's only iPhone production base, and its production capacity accounts for approximately 20% to 30% of the global total.

Quanta, which is mainly responsible for MacBook manufacturing, stopped production at its factory in Songjiang District, Shanghai in early April.

As the world's largest notebook supplier, about 20% of Quanta's total production capacity is in Shanghai.

In addition to Shanghai, Apple also has a large number of suppliers in Jiangsu, such as Foxconn, Wistron's Luxshare Precision, etc. There are dozens of suppliers in the two places combined.

Among them, for the relatively small Luxshare Precision, its only assembly plant is in Kunshan, Jiangsu.

However, it is understood that the factory is still operating under closed-loop management and strict COVID-19 prevention measures.

Compal Electronics, a major iPad manufacturer, also closed its factory in Kunshan.

In addition to Apple, dozens of suppliers to other major manufacturers also said that they have suspended their operations in Shanghai and surrounding areas since April 2.

These include two important printed circuit board manufacturers, Xinxing Electronics and Nanya Printed Circuit Board, as well as BizLink, a major supplier to Dell and Tesla.

It is said that 161 Taiwanese companies in Shanghai and Kunshan have stopped production.

The duration may exceed 17 days

Analyst Ming-Chi Kuo, who is known in the industry as the "Apple whistleblower," said that full production recovery in Shanghai and Kunshan may not resume until the end of April or early May.

However, at present, the direct impact of Pegatron's shutdown on Apple is still small, but in the long run, continued disruptions may undermine the resilience of the supply chain and consumer confidence.

As the largest iPhone supplier, Foxconn has not been greatly affected and can partially fill the recent supply gap. Assuming that Foxconn can maintain normal operations, Pegatron can gradually recover.

In this case, the impact of the lockdown on iPhone supply will be short-term and limited.

Although it is difficult to predict future changes in the blockade, Apple has the best supply chain management capabilities and a good relationship with Chinese officials, so Guo Mingchi believes that Apple can minimize the impact of the blockade on supply.

However, the longer the lockdown lasts, the further negative impact on consumer confidence will be and may be unfavorable for shipments of consumer electronics (including Apple products) in the second half of 22.

iPhone 13 has begun production in India, while the Pro series is still in China. However, the uncertainty of the epidemic has not stopped Apple from expanding production.

On April 11, Reuters reported that Apple will produce the iPhone 13 in India and plans to open the iPad production line.

The factory in charge belongs to Foxconn and is located in the town of Sriperumbudur in southern Tamil Nadu.

Some netizens also posted a comparison of the packaging boxes. It can be clearly seen from the "Country of Origin" column that the one in the picture above is produced in India.

This is also the fourth iPhone produced by Apple in India after the iPhone SE in 2017.

During this period, Apple also produced the iPhone XR and iPhone 11 models through Foxconn and Wistron. However, the current Pro series is still assembled by contract manufacturers located in China.

Kuo said that despite efforts by Apple and its partners to diversify its supply chain, China remains a major manufacturing hub. "China will remain Apple's most important production base for the foreseeable future."

In a statement, Apple said: "We’re excited to start manufacturing iPhone 13 in India for our local customers, which features a beautiful design, an advanced camera system for stunning photos and videos, and the amazing performance of the A15 Bionic chip."

It seems that this batch of iPhones should be mainly aimed at the domestic Indian market and are unlikely to be used for export.

As the world's second largest smartphone market, India contributed about 4% of the market share to Apple last year, and Apple became one of the fastest growing smartphone brands in India.

Huge impact on Shanghai's semiconductor industry

Shanghai is home to many semiconductor companies. Lingang, Zhangjiang, Caohejing, Songjiang, Minhang Zizhu and other areas all have large chip industry areas, and there are also chip companies scattered in many other places.

Data shows that in 2019, the scale of Shanghai's integrated circuit industry reached 170.656 billion yuan, a year-on-year increase of 17.65%, accounting for about one-fifth of the country. According to the plan, by 2025, the sales scale of the entire integrated circuit industry chain in Pudong will reach 400 billion yuan.

According to statistics from professional self-media such as Shande Information and No. 1 Xinwen Road, the production situation of the entire chip industry in Shanghai and its surrounding areas is not optimistic.

On April 4, several people were confirmed to be infected and many departments of Shanghai Amkor Packaging and Testing Co., Ltd., one of the top ten semiconductor packaging and testing companies in China, suspended operations.

It is reported that Amkor is the company with the largest number of employees in Shanghai Waigaoqiao Free Trade Zone, with approximately 5,400 employees, more than 3,000 of whom are working in the factory area to carry out production tasks.

Cui Shenglin, senior director of Amkor Packaging and Testing (Shanghai) Co., Ltd., said: "Once we stop, the entire world's industrial chain will be more or less affected. We hope that under the condition of good epidemic control, we can ensure the normal operation of production and help the Shanghai, China, and even the global integrated circuit industry to operate normally in the face of severe chip shortages."

In addition to Amkor, Inventec's Shanghai plant has also been shut down until April 1, and during the shutdown period, the Czech Republic and Mexico will support shipments. There is no news on whether Inventec's Shanghai plant will continue to shut down after April 1. Inventec's Shanghai plant mainly produces servers and smart device products.

TSMC's plant in Songjiang District has implemented a "two-point one-line" closed-loop management system for the plant and dormitories. The company has about 2,400 employees at ordinary times, and currently, about 70% of the workforce is maintained, including those working from home.

The three factories of Universal Microelectronics Co., Ltd. located in Songjiang District, Shanghai, immediately purchased basic living supplies such as sleeping bags, sleeping mats, toiletries, and food, and put the factory areas into closed management.

SMIC previously stated that its Shanghai company's production operations are normal, it is under closed management, and will maintain normal production.

SMIC's 12-inch wafer fab in Shanghai is its most advanced FinFET process wafer fab, where both 14nm and improved 12nm processes are produced, with a designed production capacity of 35,000 wafers per month.

Hua Hong Semiconductor has also stated that production will not be interrupted. For this reason, it has recalled necessary personnel back to the company's dormitories and adopted a closed management system with only entry and no exit to ensure online operations.

Silicon wafer manufacturer Shanghai Xinsheng Semiconductor also organized and coordinated nearly 400 people to enter the company in the Lingang public rental housing in Pudong in the early morning of March 28. The factory area began closed management to ensure continuous production of the factory.

A person from Shengmei Shanghai, the leading manufacturer of semiconductor cleaning equipment, revealed that "the company has a complete control over R&D, management, etc. in Zhangjiang Park.

Colleagues in the department took the initiative to arrange to work from home, and the Chuansha factory implemented 24-hour closed production. Cooperating with the government's epidemic prevention work and ensuring the daily life of employees. Therefore, the company's production activities have not been substantially affected. "

Hejing Shanghai Factory is located in Songjiang District, Shanghai. It is mainly engaged in the research and development, production and sales of semiconductor silicon epitaxial wafers, and provides other semiconductor silicon material processing services.

The company said that during the lockdown, employees can only enter but not leave, and must eat and live in the factory. Currently, there are about 300 to 400 employees in the Shanghai factory. Personnel arrangements and production will not be affected, but shipments may be affected.

Power semiconductor company Nissi Semiconductor Technology (Shanghai) Co., Ltd. urgently purchased more than 1,000 sleeping bags and quilts, achieving 98% output with a 75% attendance rate.

Maolin Optoelectronics, a supplier of light guide plates for backlit keyboards of Apple laptops, announced on the 28th on behalf of its subsidiary Shanghai Xianglong Electronic Technology Co., Ltd. that due to the impact of the COVID-19 pandemic, it will suspend operations from March 28 to March 31 in accordance with local government policies. There is no subsequent news on resumption of work.

In addition, relevant persons in charge of many semiconductor design companies in Shanghai, including mobile phone chip manufacturer Unisoc, CIS company GalaxyCore, memory interface chip manufacturer Lanqi Technology, and EDA Sinovation, said that they have implemented epidemic prevention measures in accordance with relevant policies, and the vast majority of employees are working from home and actively cooperating with the screening work.

Kunshan, Suzhou, Wuxi, Changzhou, Japan and other places were also affected

In addition to Shanghai, industries in the Yangtze River Delta have also been hit by the outbreak of the new coronavirus variant.

Kunshan manufacturers of chips and semiconductor materials:

Xinxing announced that its Kunshan subsidiaries have temporarily stopped production, including Kunshan Dingxin, a subsidiary that mainly produces PCBs and HDI, and Xinxing Tongtai, a subsidiary that mainly produces flexible boards, accounting for approximately 20~25% of production capacity.

Tai Optoelectronics announced that its Kunshan subsidiary has temporarily stopped operations, with an estimated production capacity share of about 30% to 40%.

Nandian announced that the Kunshan plant will implement closed-loop management, which will not affect the company's operations. The production capacity is estimated to account for about 40%, mainly focusing on the production of PCBs and BT substrates.

Dingying announced that it would implement rotating shifts in accordance with government policy, and it is estimated that Kunshan's production capacity will account for about 60~65%.

Nanzi Electric stated that the Kunshan plant was temporarily shut down from April 6 to April 8, and there is no follow-up news at the moment.

Yatai Metal, an upstream equipment manufacturer, said it would cooperate with the local government's COVID-19 prevention and control work by adjusting production capacity and working from home.

Not only that, places like Suzhou, Wuxi and Changzhou have a dense layout of suppliers around the electronic products and automobile industries. If there is a problem with one of the suppliers, it will have a huge impact on the upstream and downstream production status of the entire industry.

For example, Kunshan is home to many printed circuit board (PCB) companies that provide electronic components for engine, body, chassis control systems and other functions to first-tier suppliers and automakers. All of these companies have announced shutdowns.

Once these companies stop production, downstream car manufacturers that need their products, regardless of size, will also have to stop production.

According to an internal notice released by Tesla on April 3, it has notified workers and suppliers that the Shanghai factory will not resume production on April 4 as expected.

Tesla had planned to resume production on Monday, but an internal notice said the plan had been canceled, according to people familiar with the matter. The company did not elaborate on the reason or disclose when it expected to resume production.

Germany's Bosch Group has also already suspended production at its factories in Shanghai and Changchun, Jilin province. At the same time, it has put its other two factories, one in Shanghai and the other in nearby Taicang, into "closed-loop operations", confining workers to the factory premises and not allowing them to go out.

The closure of Jiangsu, Zhejiang and Shanghai has now affected Japan.

Mazda announced on April 12 that its Hiroshima headquarters plant and Hofu plant in Yamaguchi Prefecture will stop production on the 14th and 15th. The reason is that cities such as Shanghai have implemented lockdowns due to the epidemic. As a result, Mazda's partner companies' factories have stopped production and some parts cannot be purchased.

Due to the shortage of semiconductors, the Mexican factory is also expected to shut down for two days in April.

The company also suspended production at two factories in Japan for two days in early April for the same reason. ​