Pegatron, a Chinese iPhone manufacturer, has shut down two of its factories. Here’s why.

In response to China’s COVID-19 regulations, Taiwan’s Pegatron Corporation, which assembles iPhones for Apple, announced on Tuesday that it had ceased operations at its Shanghai and Kunshan plants. Pegatron manufactures iPhones for Apple.

Chinese authorities have been tightening controls in Shanghai since late March, and the neighbouring city of Kunshan has also tightened restrictions in an effort to contain the country’s worst COVID-19 epidemic since the coronavirus was found in the city of Wuhan in late 2019.

Global corporations, from from phone manufacturers to chip manufacturers, are heavily reliant on China and Southeast Asia for their manufacturing needs, and they have been working to diversify their supply chains since the epidemic wreaked havoc.

The Financial Supervisory Commission of Taiwan said on April 7 that a total of 161 listed Taiwanese firms had notified that their operations in Shanghai and Kunshan had been halted; 41 of these companies are involved in the electronics industry.

TF International Securities analyst Ming-Chi Kuo predicted that a complete resumption of production would not be possible until late April or early May. He added that Apple’s strong supply chain and relationship with the Chinese government would help to mitigate the impact of a shutdown on the company.

In response to a request for comment, Apple did not immediately react.

According to data source TrendForce, businesses are being forced to rely on available inventory as a result of staffing, logistics, and transportation challenges, which is only meeting the needs of production lines and aggravating the mismatch between components.

According to the TrendForce analysis, a rise in shipments and demand for goods following the lifting of lockdowns could cause customs officers to become overburdened, resulting in potential delivery delays.

Consumers’ desire to spend their money on everyday necessities rather than on phones and gadgets may potentially have an impact on demand for iPhone devices.

Pegatron stated that the government’s approval of the two plants was required before the company could resume operations.

In order to restart operations as quickly as possible, the company said it will maintain close contact with consumers and suppliers while also “actively cooperating” with local governments.

Apple’s iPhones are also assembled in China by the significantly larger Taiwanese company Foxconn, which is the world’s largest contract electronics manufacturer. The company’s operations in the southern city of Shenzhen were halted last month as a result of a COVID-19 outbreak in the region.