Daily Management Review

Fear Of Disruption Of Global Supply Chains Following China's New Covid Lockdowns


Fear Of Disruption Of Global Supply Chains Following China's New Covid Lockdowns
A range of global companies – ranging from Apple supplier Foxconn to automakers Toyota and Volkswagen, have been forced to halt some of their operations in China because of the country’s latest measures to control the most recent Covid-19 outbreak which is the largest in the last two years. This has increased concerns of disruptions of global supply chains.
Massive restrictions according to the policy of the Chinese government of zero-tolerance to Covid-19 and thereby suppressing contagion as quickly as possible have been imposed in multiple Chinese provinces and cities. This includes the southern Chinese city of Shenzhen which is known as a tech hub.
Authorities in Shenzhen, known as China’s Silicon Valley, have started to have mass testing for Covid-19 following dozens of new cases locally in recent days. While suspending public stransport, authorities in the city have also asked residents to work from home this week as much as possible.
The lockdown of the tech hub of China was being monitored by the Biden Administration "incredibly closely," said White House press Secretary Jen Psaki. "What we're looking at is of course ... the impact on some of these ports around the impacted areas of China," she said in a Monday afternoon briefing.
So far this year, more local symptomatic Covid-19 cases have been reported in China than had been reported for the entire of 2021.
The operations in Shenzhen of Foxconn, formally known as Hon Hai Precision Industry Co Ltd, would be halted until further notice, the company said, and added that backup plants to reduce disruption would be deployed by it.
The operations of Foxconn and its subsidiaries in Shenzhen would be temporarily halted for the first half of the week, said reports quoting sources from the company.
Companies that were able to create a "closed management" system, wherein the staff would live and work in a bubble, would be allowed to operate by the authorities, said reports quoting sources. Such a system was in place during the Beijing Winter Olympics.
Chip substrate and printed circuit board maker Unimicron Technology Corp (3037.TW), which also supplies Apple and Intel, and flexible printed circuit board maker Sunflex Technology Co Ltd were among the Taiwan companies who announced they have halted operations in Shenzhen.
Following fresh Covid-19 cases in Wuhan, a medical worker gets a sample from a Foxconn worker.
Sunflex's manufacturing will be shuttered until Sunday, according to the company.
Apple has yet to respond to the situation.
The limits, according to Paul Weedman, who leads manufacturing consultant Victure Industrial Co., Ltd in Shenzhen, are having a rippling effect beyond Shenzhen and into Guangdong province. According to him, production for some of his customers' orders has been halted, and numerous factory inspections have been cancelled.
"Imagine you have a factory of 100 people and all of a sudden you can’t do anything - you can’t fulfil your existing orders, you can’t accept new orders. The impact is not 2 or 3 weeks, but 3-6 months."
The Yantian International Container Terminal (YICT) in Shenzhen, one of China's busiest ports, stated it was working normally in a WeChat statement, while two enterprises with facilities there said they had to temporarily halt operations.
Other cities have implemented differing degrees of limitations. Changchun, the capital of northeastern Jilin province, has been shut down, as have schools in Shanghai's financial district and public transportation in Dongguan's manufacturing district.