Zero Covid-19 lockdown policies in China continue to disrupt factories making car parts and some essential consumer electronic components, according to analyst firm Omdia. Displays and polarizer production work are especially threatened.
In lockdown areas, city residents are under order to stay at home, while truck drivers transporting products from factory to factory or to ports have been ordered to take Covid-19 tests. If they are found at risk of infection, they are quarantined.
Omdia identified delays in customs clearance in Shanghai and nearby ports are continuing to cause disruptions as are transport restrictions in Kunshan. Shanghai is China’s biggest port. Kunshan has stopped production of printed circuit boards, antennas, polarizers and connectors, Omdia said.
Companies can operate factories using their inventories “but safety stocks will only be able to support plant operations for a finite period,” Omdia said in a note issued April 16 by Iren Heo, principal analyst for display optical film and driver ICs.
If lockdowns in Shanghai continue to the end of April, supply disruptions could impact production of MacBooks and IPads for April, Omdia said. Apple uses several Asian factories to product chips and assemble devices.
Specifically in Shanghai, Nitto Denko operates a polarizer backend process factory. Polarizers for game consoles, smartphones and MacBooks and iPads are processed at the Nitto Denko Shanghai backend process line and they are shipped to the panel module line. A polarizer is an optical filter that lets light waves of a specific polarization pass through while blocking light waves of other polarizations.
Omdia said Nitto Denko has other factories in Shenzhen and Vietnam, but said “it would be challenging to immediately provide backup for the Shanghai facility. Shenzhen underwent lockdown for a week in early March over Covid and was still making up lost production in recent days.
It is not easy to use other polarizer manufacturers’ factotories, Omdia said.
Covid cases were on the rise in Shanghai and reached a record number, according to city officials who spoke to Reuters. Other cities in China are reporting are reporting their “dynamic clearance” approach to defend against the highly transmissable Omicron variant.
In one example, Kunshan near Shanghai went into lockdown April 6. That is where Heungmei Optoelectronics (HMO), the second polarizer supplier in China mainly for TV polarizers, is located. HMO mainly supplies polarizers for large TV panel makers including CEC-Panda and others.
HMO inventory held by panel makers could run out decreasing second quarter production by 5%, Omdia projected.
In Guangzhou, Shanjin Optoelectronics could shut down because of Covid lockdowns, reducing polarizer production. Panel makers have turned to other polarizer makers including from Taiwan-based CMMT, Sunnypol, BQM and Samsung SDI to compensate for decreased HMO production.
Shanjin operates two lines in Guanghzhou is and is prepping two more in 2002 that have been relocated from South Korea to China.
Transportation restrictions can increase supply chain risks and costs, Omdia noted. In February 2020, some polarizer product prices increased with a Covid lockdown policy in Wuhan.
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