Expect delays on shipments of iPhones and other electronics.
China is grappling with its largest surge in Covid-19 cases since the pandemic began and has instituted a strict lockdown that’s shut down a major port city and the country’s tech hub. Here’s more on the outbreak and a look at how it’s expected to impact the supply chain.
China’s Covid surge
Through two years of the pandemic, China has managed the spread of Covid-19 within its borders with a fair amount of success. Its “Covid zero” approach, which included mass testing, large-scale lockdowns, and a broad travel ban, spared the nation from the wave after wave of infections that have hit other parts of the world.
But in late February, the country saw a steep rise in cases driven by the Omicron variant. China reported 3,122 new infections on Sunday, up from 1,524 the day prior, per the New York Times. That forced Shanghai into a partial lockdown and led to the complete closure of Shenzhen, a city of 17.5 million that’s home to the fourth-largest port in the world. In Shenzhen, all nonessential workers must stay home, adults will need to take three Covid-19 tests, and the city’s public transportation has ground to a halt.
How a lockdown in Shenzhen could cripple the global supply chain
An outbreak in China’s Silicon Valley last spring contributed to a steep rise in prices for imported goods in the U.S. and worldwide, the NYT reports. This time, supply-chain experts say the weeklong lockdown has the potential to devastate the movement of crucial goods around the world for the foreseeable future.
“It’s going to be really bad,” Daniel Stanton, a professor of marketing at Bradley University, told Fortune. “When we’re talking about goods coming out of China, it’s not just the finished products we buy directly, but it’s also a lot of parts that are crucial to manufacturing other things that we buy, too.”
What products will be impacted by China’s Covid lockdown?
On Monday, Foxconn, the main Chinese manufacturer of the iPhone and other Apple products, said it’s halting production. Foxconn said it’s adjusting its production line in an attempt to avoid disruptions, but Stanton says there will almost certainly be delays for iPhone shipments.
Beyond that, the lockdown may slow the production of computers, tablets, headphones, and a whole range of other electronic devices. That’s because Shenzhen hosts Tencent and Huawei. The two tech giants are involved in the manufacturing of parts needed for many electronics.
Lockdowns in other cities have also forced Toyota and Volkswagen factories to suspend their operations.
