One quarter needed to assess impact of China lockdown: AUO head

AUO chairman Paul Peng (2409-TW) remarked on April 19 that the environment this year remains very challenging due to the impact of China’s strict border control and the war between Russia and Ukraine. 

Although many places in China are gradually lifting restrictions at this stage, the panel maker has not seen any relief in personnel, materials and supply chain yet. 

At this stage, the industry can only rely on “disaster mitigation” before assessing the situation’s impact for at least one quarter, Peng said. 

The war between Russia and Ukraine has continued to cause the rising price of raw materials and more inflation, which in turn is driving weak demand in the consumer market. 

In addition, the different levels of lockdown in China’s highly populated cities in the East region have impacted the supply chain of electronic components and other global industries. 

Peng explained that many companies are currently shutting down operations or have only resumed partial production. The same is true with their operations, which are affected to a certain extent.  

The globalization of the industry has resulted in an upstream and downstream division of labor. Therefore, as long as a city or a component factory is closed, it will affect the global, especially the downstream assembly plants are affected most severely, he continued. 

In AUO’s case, Peng pointed out that it is not possible to assess the extent of the impact at this stage. Yet, it is impossible to maintain 100% of production. At this stage, we can only try to “mitigate” the disaster to minimize its impact, he said.  

As some employees of the Suzhou and Kunshan plants live in factory dormitories, it can meet the requirements of closed-loop production. 

However, without the restoration of supply chain logistics, he remarked that “even if we can produce today, it does not mean that we can produce tomorrow,” meaning that the situation is evaluated every day. 

Peng observed that lockdown restrictions are being relaxed in various places. But it will take at least one quarter before the supply chain is restored.  

Without guarantees on the return of manpower, port congestions, lack of containers, and more supply chain management capabilities will continue to be tested. This closure will likely be more serious than during the previous power restrictions.