China's Covid lockdowns hit Apple iPhone supplier

16 March 2022

A lockdown in the Chinese manufacturing hub of Shenzhen to combat new Covid-19 outbreaks has forced Apple supplier Foxconn to suspend operations at two sites and is threatening further disruptions to global supply chains.

Foxconn, Apple’s top iPhone manufacturer, said it was awaiting further guidance from local authorities to determine when it could reopen the plants.

This followed the local government’s decision to impose a seven-day lockdown on 17.5 million people in the southern China tech hub after the city reported 66 new Covid cases.

Shenzhen has ordered most businesses and public transportation in the city to shut down, while non-essential workers must stay at home.

Foxconn said in a statement that it had “adjusted the production line” – and diverted production to other plants in China to minimise the impact of the suspensions. 

Shenzhen is home to companies such as Huawei Technologies and is potentially at risk of a large-scale Covid outbreak because of its shared border with Hong Kong — currently recording over 30,000 cases per day.

“If prevention and control is not strengthened in a timely and decisive manner, it could easily become large-scale community transmission,” Shenzhen health official Lin Hancheng said in a media briefing.

While the city’s Yantian port is currently still operating as normal, analysts expressed concern that an outbreak at the port could lead to supply chains disruptions around the world.

When Yantian briefly shut down after a Covid outbreak last June, the resulting shipping backlog took months to ease.

Port closures would likely be accompanied with road closures and other movement restrictions – impacting cargo flow.

Yantian, the world’s fourth largest port, handles roughly 90% of China’s electronics shipments.

The Shenzen lockdown has also provoked new wider fears that China intends to forge ahead with its zero-tolerance approach to new Covid cases – risking further cascading effects on global supply chains.

“Lockdowns in China will further reduce capacity and cause a surge in already inflated shipping prices,” Johannes Schlingmeier, co-founder and CEO of Container xChange, told the South China Morning Post.

“The shockwaves will be felt across America and almost everywhere in the world.”

Lockdowns have also led to industrial companies in central China suspending production, with cities near Shanghai closing highway exits or forcing drivers to show a negative PCR test — causing huge traffic jams and slowdowns of deliveries of components.

“The business risk in China now is higher than at any time since late spring 2020,” Julian MacCormac, chairman of the British Chamber of Commerce in China, told the New York Times.

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