Camera module constraints add more pressure as China power cuts hit supply chain.

 

Apple's newly launched iPhone 13 has encountered production snags, partially associated with problems in COVID-hit Vietnam. (Photo by Arisa Moriyama)

 

TAIPEI/HO CHI MINH CITY -- Buyers of Apple's new iPhone 13 are facing longer-than-expected delivery times due to the COVID wave in Vietnam and the U.S. tech giant's deployment of a new camera feature, Nikkei Asia has learned.

 

The disruption is mainly associated with constrained supplies of camera modules for the four iPhone 13 models because a significant number of its component parts are assembled in Vietnam, according to people familiar with the matter.

 

Supply chain sources had expected this year's rollout of new iPhones to be relatively smooth, given that most changes to the updated devices are only incremental and Apple has been able to stockpile many key components.

 

But the company has expanded the use of its new sensor-shift optical image stabilization (OIS) to all four iPhone models when previously it was only in the premium iPhone 12 Pro Max. This has put suppliers in the position of having to ramp up production without jeopardizing production quality, against the backdrop of severe restrictions due to COVID.

 

Sensor-shift OIS stabilizes sensors on the camera to make images smoother and video steadier even if users are in motion, and it is an improvement on previous technology that stabilized camera lenses.

 

"Assemblers can still produce the new iPhones, but there's a supply gap [in] that the inventories of the camera modules are running low," one of the executives with direct knowledge told Nikkei Asia.

 

"There's nothing we can do but to monitor the situation in Vietnam every day and wait for them to ramp up the output."

 

The situation may improve as soon as around mid-October as production at one of the key iPhone camera module manufacturing facilities in southern Vietnam has gradually resumed in recent days after several months of on-and-off disruption, another executive familiar with the situation told Nikkei.

 

The current waiting time for an iPhone 13 Pro Sierra Blue with 512 gigabytes (GB) of storage is up to five weeks in China -- Apple's third-largest market -- while waiting time for the same model is also five weeks in Japan and four weeks in the U.S., according to the company's website.

 

Even waiting time for the iPhone 13 mini, which comes with the smallest screen of the four new iPhones, is seven to 10 days in China and the U.S. and up to 15 days in Japan.

 

Apple declined to comment for this story

 

Like other companies, Apple has been wrestling with unprecedented chip and component shortages for the whole year that have held back its revenues. It has diverted some chips meant for its new iPads for use in the iPhone 13 series, which has also led to longer-than-expected delivery times for the new iPad and iPad mini, one of the people with direct knowledge said.

 

Apple has limited consumers in China to a maximum of two iPad purchases for the newly launched models, its website showed, a sign that these supplies are also constrained.

 

Meanwhile, many Apple suppliers are now scrambling to respond to a widespread production stoppage this week in several Chinese cities in Jiangsu, Zhejiang, and Guangdong provinces -- home to many tech manufacturers.

 

Beijing's tightening control of energy consumption has led to a halt in industrial power supply across the provinces.

 

So far, key iPhone assemblers Foxconn, Pegatron and Luxshare have not yet been significantly affected by the power cuts, Nikkei learned.

 

But still unknown is the scope of a potential chain reaction from production halts at the makers of materials, components, modules, and parts. Suppliers are worried about another wave of unexpected power supply stoppages next month.

 

Surge in Covid cases

 

Vietnam, an emerging tech manufacturing powerhouse that has received a boost from the U.S.-China trade conflict, has been suffering from a surge in COVID cases since April.

 

The southern part of the country, including Ho Chi Minh City and Binh Duong Province, where some tech suppliers are based, has been heavily hit by the delta variant.

 

Suppliers for the likes of Apple, Netflix, Nike, and Ikea were forced to suspend production in mid-July as the government imposed strict measures to contain the deadliest wave of the virus so far. Companies could stay open only if workers lived on-site, although it has since allowed more factories to reopen if workers are vaccinated, tested regularly, and living in uninfected areas.

 

The U.S., European and South Korean chambers of commerce in Vietnam -- all representing key foreign investors -- earlier this month voiced concerns to the Vietnamese government that overly strict COVID lockdown measures could risk businesses' willingness to invest in the Southeast Asia nation. One survey showed 20% of companies have already shifted production abroad.

 

Prime Minister Pham Minh Chinh on Saturday said the government aims to bring the country back to something resembling normal by the end of this month.

 

"There's indeed a constrained supply of camera modules for the iPhone 13 series due to the pandemic, but the impact on the shipment of the new iPhones should still be manageable," Eddie Han, a senior analyst with Isaiah Research, told Nikkei Asia, citing his supply chain checks.

 

Han said it would be worrisome if the power supply restrictions in China continue to affect printed circuit boards, materials, and petrochemical suppliers, as then it will likely impact component supplies for iPhones in the coming quarter.

 

 

 

Hells bells now that’s ruined my day........