Apple iPhone assembler Pegatron said Tuesday it has suspended production at its facilities in Shanghai and Kunshan in response to strict Covid-19 prevention measures.
The Pegatron pause shows the risks associated with Apple’s reliance on manufacturing in China. Shanghai authorities have imposed stringent stay-at-home measures as mainland China faces its worst Covid outbreak since the initial phase of the pandemic in early 2020. Those government lockdowns, which began in late March, have threatened to disrupt global supply chains.
Pegatron assembles about 20% to 30% of all iPhones, according to Nikkei Asia. Pegatron said in a filing it is cooperating with the local government and will resume operations as soon as possible.
“The Pegatron closures throws gasoline on the raging fire which is the supply chain for Apple and other parts of the iPhone ecosystem,” Wedbush analyst Dan Ives told CNBC in an email. “This is not the news the bulls want to hear as this amplifies supply chain issues for iPhones just as Apple was seeing an improvement.”
Shares of Apple were up about 1.5% in premarket trading, suggesting investors aren’t concerned about reports of production suspension.
It’s the latest hit to Apple, which just announced its latest slate of new products, including a budget iPhone. Last month, Foxconn, a major assembler of iPhones, suspended full operations. It has since “basically” resumed normal operations, according to Reuters.
Foxconn at the time said it would adjust its production line to other locations to minimize the impact. Almost 50% of iPhones are produced at a factory in Henan province, according to a Bank of America research note. But Pegatron’s only active iPhone manufacturing facilities are in Shanghai and Kunshan, according to Nikkei. Its new iPhone assembly plant in India has not yet started operations, according to the report.
Apple declined to comment. Pegatron did not immediately respond to a request for comment.