(Bloomberg) — IPhone assembler Pegatron Corp. suspended production at its Chinese plants in Shanghai and Kunshan as the country’s policies to control the worst virus outbreak in two years disrupt global supply chains.
Resumption of output at the sites will depend on notifications from the government, Pegatron said in an exchange filing Tuesday. The company is continuing to assess the suspension’s impact on its finances.
The Taiwanese company makes iPhones in Shanghai and nearby Kunshan, both under lockdowns as China pursues its Covid-zero strategy. Pegatron had been able to keep production humming thus far as local governments allowed some manufacturers to maintain their operations with a closed-loop system that reduces the chances of workers getting infected.
Pegatron splits iPhone assembly orders in China with bigger Taiwanese rival Foxconn Technology Group and Chinese peer Luxshare Precision Industry Co. Foxconn suspended some iPhone assembly work in Shenzhen for a few days in March because of Covid-related restrictions.
Shanghai said on Monday it was partially easing a city-wide lockdown, but the majority of its residents are still subject to tight movement restrictions and local communist party chief Li Qiang vowed to continue measures to control the outbreak. The weeks-long lockdown has triggered a food shortage and threatened to throw already fragile supply chains into further turmoil.
Kunshan’s local government said it will stick with existing Covid-prevention policies despite a decline in the number of cases, asking residents to “make less fuss” and fully comply with the measures. Local officials have reported three positive coronavirus cases in Pegatron’s dormitory in Kunshan in the past four days.
Widespread Chinese lockdowns are exacting an unknown toll on the world’s No. 2 economy, where most electronics from iPhones to laptops and PCs are made. While many of the most critical factories in cities like Shanghai have managed to stay in operation, worsening logistics jams are constricting shipments of components, draining inventories to the point where some manufacturers including Pegatron are down to just a few weeks’ stocks, consultancy Trendforce estimates.
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