With lockdown measures being imposed in several Chinese cities due to a resurgence of COVID outbreaks locally, notebook assemblers and related suppliers are being asked by brand US vendors to accelerate the pace of their production relocation, according to industry sources.
Shenzhen and Chengdu recently raised epidemic prevention measures. Chengdu announced PCR testing for all workers on September 1 for what is locally being called a "soft" lockdown.
The large-scale lockdown of Shanghai and Kunsan in the second quarter severely damaged the local economy and disrupted the local electronics manufacturing supply chain. Actions by the Chinese government are pushing brand customers to decentralize and establish new production bases outside of China.
Starting at 6 pm on September 1, residents of Chengdu are restricted from leaving their homes and the city. Only residents working for public services, such as water, power, fuel, and communications, are allowed to leave, while all other industries work from home. The restrictions are expected to remain in place from September 1 to 4.
Compal Electronics and Wistron have production bases in Chengdu. Compal said it will cooperate with local government epidemic prevention measures and has the experience to carry out the measures.
Wistron said through closed-loop manufacturing, materials and goods can still come in and out, and they would not be impacted by the lockdown.
Despite the notebook supply chain disruptions caused by power cuts and COVID-induced lockdowns this year in China, most customers do not expect much impact on the supply side due to the slow peak season. Brand vendors are instead eager to digest on-hand inventory.
ODMs pointed out that brand customers began requesting production base decentralization when the US-China trade war started heating up. At the time plans were put on hold since the trade war did not impact tablet and notebook computers. However, customers restarted plans after the lockdowns in the second quarter.
Apple MacBooks, which are produced in Shanghai, will also reportedly be produced in Chongqing, where a new assembly plant is set to be introduced in second-half 2022, as well as in Yunnan, industry sources said, adding that Apple iPads are produced in Chengdu and Kunshan and production capacity in Vietnam will also continue to expand to produce the Apple Watch and MacBooks.
Dell has production bases in Kunshan, Chongqing, and Chengdu in China, as well as in Vietnam. Hewlett-Packard (HP) has production facilities in Chongqing and Shanghai in China, and in Taiwan. It has been reported that HP will set up a production base in Mexico.
Customers require that manufacturers have production sites in at least two locations in China to prevent disruptions from COVID-related closures, according to the sources. Customers also require production bases outside but close to China. As such, Vietnam has become the top choice.
Compal currently has two factories in Vinh Phuc Province, Vietnam. Hon Hai Precision Industry (Foxconn) and Wistron also have facilities in Vietnam.
Foxconn reportedly began trial production of Apple MacBooks at its Vietnam factory. Foxconn has also invested another US$300 million to build a factory in Vietnam's Bac Giang Province. Foxconn has not commented on the reports.
Article translated by Eifeh Strom
