Sunday, February 25

If Shenzhen sneezes, Apple gets a cold: China’s lockdowns put the tech industry in check again

Faced with the rise in infections, China has decided to impose a one-week ‘lockdown’ in Shenzhen, one of the world capitals of electronics. A closure that directly affects dozens of factories, some of them as important as that of Foxconn, a supplier to manufacturers such as Apple, Volkswagen or Toyota. If just a month ago from Foxconn they were optimistic and anticipated the end of the global shortage of chips, the Covid-19 once again worries the entire technology industry.

Foxconn stops and directly affects Apple. “Foxconn’s operations in Shenzhen have been suspended since March 14, following local policy against Covid-19,” they explain from Foxconn in a statement. Foxconn is Apple’s largest supplier and assembler of iPhones, iPads and Macs.

Fortunately, not all of Foxconn’s production in China is in Shenzhen. 50% is produced in Henan province. Thanks to this, from Foxconn they assure that they are going to “diversify their production to minimize the potential impact”.

Not only iPhones come out of Foxconn factories, but also electric motorcycles that cost $9,400

The iPhone 14 may be the first victim… The latest rumors about the iPhone 14 point to a historic change: only the Pro models would carry the new Apple A16 processor. The normal iPhone 14 would maintain the A15 Bionic chip, which would mean a differentiation that did not exist until now.

…of an Apple that can significantly raise its prices. Analyst Ming-Chi Kuo points out that there are not many reasons to be optimistic about 2022 and that there is a reduction in production. The fact that Apple could choose to incorporate the A16 only in the Pro models can also be understood as a way to expand margins and raise prices. A way to compensate for the lack of components.

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Huawei, OPPO, Realme and the big Chinese brands have headquarters in Shenzhen. With more than 17 million inhabitants, Shenzhen is a huge city and also home to the vast majority of Chinese technology companies. In addition to Foxconn, we also have factories for companies such as Huawei, OPPO, OnePlus, Realme, ZTE or the drone manufacturer DJI. Also from the manufacturer of robots Makeblock or the manufacturer BYD, supplier of brands such as Motorola or Nokia. And it is that Shenzhen is not only home to many brands, but also to manufacturers whose components are widely used throughout the technology industry.

We’re not just talking about the hardware. Among the companies in the city is also Tencent, the world’s largest video game company, ahead of Sony and Microsoft/Activision/Blizzard.

The great economic pole of southern China closes. And the consequences if it is prolonged can be enormous. The figures of the technology sector in Shenzhen are impressive. It accounts for 35% of the city’s GDP, there are more than 18,000 high-level companies and 50,000 medium-sized technology companies. In 2020, the income level of the city’s technology sector was estimated at 385,000 million euros.

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If in 2021 we had a major crisis with containers, we will have to be attentive to see how the rise of the Omicron variant and the total closures in China can add more pressure to a technology industry that was not yet fully recovered.

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