Tangles in Apple’s Supply Chain

Image by Michael Schwarzenberger from Pixabay

COVID-Closures Keep Gumming Up the Works

25 APRIL 2022 - The emphasis on the supply chain in Morgan Stanley analyst Katy Huberty’s most recent note seems sensible. Looking over last week’s headlines, the supply chain seems to have been no less chaotic than in weeks prior. A piece from 9 to 5 Mac on Tuesday 19 April had good news/bad news for Apple on the manufacturing front. The good news - iPhone City, nickname for Foxconn’s huge iPhone factory in Zhengzhou, has so far dodged COVID-related factory shutdowns. The bad news - “three other key Apple suppliers in China were (…) forced to halt production [the week before].” 

Of course, the concern isn’t just the locations that put parts together to make iPhones. There’s also the factories that make the parts. Just a day later - last Wednesday 20 April, 9 to 5 Mac ran a piece that sounded fairly cataclysmic. That cited a Nikkei Asia report that had “at least half” of Apple’s top 200 suppliers in parts of China “at risk of further COVID-19 lockdowns.” According to 9 to 5 Mac:

The head of display maker AU Optronics said that the lockdowns “could lead to a supply chain cutoff in the worst-case scenario,” and that the problem extends down to the most mundane-sounding – but still crucial – products.

“Some very basic materials such as carton boxes are in serious shortage,” they’re said to have said. That followed a warning a few days earlier from Huawei’s head of consumer tech, Richard Yu, who said, “If Shanghai cannot resume production by May, all of the tech and industrial players who have supply chains in the area will come to a complete halt.”

Chip Shortages Persist

Crazy thing about the supply chain, though: It’s not just COVID-closures kinking it up. A huge issue is the shortage of chips, caused partly by COVID-closures, but largely by growing demand from a wide array of industries - including automotive. As a piece from 9 to 5 Mac on Friday 22 April pointed out:

The biggest issue is not with CPUs and GPUs, but far more mundane chips like display drivers and power management systems. These relatively low-tech chips are used in a huge number of devices, including Apple ones.

There’s a Chinese company called BOE that makes iPhone displays for Apple. At least it does in theory. According to 9 to 5 Mac, Apple had hoped for 40 million BOE displays this year. A lack of necessary chips pushed that expectation down to 30 million. Now 30 million may be overly optimistic. The report quotes a piece from TheElec, indicating that a lack of display drivers, plus problems producing panels with the chips it has, are playing havoc with expectations. “BOE’s production problem from the situation is expected to continue up to at least May,” according to sources for TheElec.