Economic analysts are worried that the closure of production facilities in Shanghai, including those supplying electronics to tech companies, could spell even more trouble for the already fragile global tech supply chain, which has never fully recovered to its pre-pandemic state.
On Wednesday, April 13, Quanta announced in a statement that the company had to comply with government restrictions, which is why it was suspending its plant in Shanghai. At least 30 other Taiwanese corporations that have offshored some of their manufacturing to China's financial hub were forced to shut down their factories.
Many of these companies are also suspending their operations in Kunshan, directly to the northwest of Shanghai.
Kunshan, a city of around 1.6 million people, also plays host to suppliers for Big Tech's hardware. It began a citywide lockdown in early April as local communist officials and Beijing were concerned that the rising infections in Shanghai would affect the city. (Related: Deaths in Shanghai elderly care facility prove China's "zero-COVID" strategy is A FAILURE.)
The companies, both in Shanghai and in Kunshan, make parts for consumer electronics products like personal computers, laptops and smartphones.
Pegatron, another Taiwanese electronics manufacturing company, shut down its iPhone assembly plants in Shanghai and Kunshan. Other key manufacturers like Luxshare and Compan Electronics have also temporarily suspended major operations in both cities.
Official data showed new cases in Shanghai reaching a record-high of 26,330 new infections on Tuesday, April 12. Cases continue to surge despite the Chinese Communist Party (CCP) implementing its "zero-COVID" strategy, involving intense lockdowns and other economic and social restrictions.
China is the world's largest producer of electronics. Kunshan is considered to be one of the world's largest manufacturing hubs for said electronics. The lockdowns there and in Shanghai are aggravating economic concerns and exacerbating disruptions to the already fragile global supply chains.
Some companies in Shanghai and Kunshan have managed to keep at least some of their manufacturing operations running by operating in what is known as a "closed-loop system."
Closed-loop systems effectively put factories and their workers in bubbles. In exchange for getting the CCP's green light to keep factories running, employees are confined to factory campuses and are not allowed to make any kind of contact with the outside world. They must also adhere to certain COVID-19 protocols, including mandatory testing.
But these systems are not preventing manufacturing output from slowing down. Logistics jams are constricting shipments of raw materials into facilities and draining factory inventories to the point where some manufacturers, including Pegatron and Quanta, are running dangerously low on items that they can produce and send out.
"Even if some companies are allowed to continue production, their utilization rates have fallen to between 40 to 60 percent," said Patrick Chen, head of research in the Taiwan branch of brokerage firm CLSA. "Raw materials can't be moved in and finished products can't be moved out."
Many contract electronics makers have already reported being unable to secure enough materials to manufacture CPUs, battery modules and panels. Certain other manufacturers are facing a shortage of multilayer ceramic capacitors (MLCC), used for servers and automotive products.
"The biggest problem for MLCC suppliers at this stage is they cannot deliver materials to Shanghai and Kunshan," noted market research company TrendForce. "Limited manpower and logistics and suspended transportation options mean [contract electronics makers] can only rely on onsite inventory to barely meet the needs of production lines, further exacerbating component mismatches."
For more news about the lockdowns in Shanghai and other parts of China, visit Pandemic.news.
Watch this video from The New American as journalist Ben Armstrong talks about how globalists are enjoying watching the CCP exert its power and "create hell on earth."
This video is from The New American channel on Brighteon.com.