New lockdown in China: the tech market is shaking

History repeats itself: while in the West the health situation has vaguely normalized, in China we come back to talk about lockdown. There is a rapid surge in Covid-19 cases across the nation, bringing the daily average from a few hundred to over 3.000 last Saturday. The newspapers define it "the worst outbreak since early 2020“, When the city of Wuhan became infamous all over the world. As a result, the Chinese government is enacting highly restrictive policies, forcing millions of people home and consequently closing numerous factories. And that could again deal a severe blow to the tech market.

For at least 4 days there have been over 1.000 daily cases of Covid-19 in China: numbers that may seem harmless to us (in Italy the average is 50.000 cases) but which are not so for a China that last February registered a few dozen cases per day. Since the beginning of the pandemic, China has applied a strict Zero Covid policy: just a few cases are enough to quarantine cities with millions of inhabitants. The most striking case is that of Xi'an, which at the beginning of 2022 forced 13 million inhabitants home for almost 2 weeks, with all the problems that derive from it.

China tightens its healthcare lockdown, with consequences for the tech market

Now these lockdowns are also extending to other cities in China, in particular Shenzhen, the nerve center of a tech market that unfolds all over the world. The Chinese government has set up a public transport block and is organizing swabs to contain possible outbreaks, with citizens unable to leave the city. Essential stores will continue to operate as usual, while businesses such as restaurants will only be able to deliver. Recall that the industrial and technological centers of Shenzhen host the headquarters of companies such as Huawei e ZTE, as well as numerous offices for Xiaomi, OPPO, OnePlus, vivo and many others.

Not to mention Foxconn, the heart of the production of electronic devices around the world. From its factories come smartphones and not branded Huawei, Xiaomi, Apple, Nokia, Lenovo and Motorola; but also Sony, Microsoft and Nintendo consoles, as well as various products for HP, Dell, Cisco, Acer, Amazon, Toshiba and Sharp. In this regard, I recommend this editorial in which I explain because all smartphones come from China. Due to the health situation, Foxconn has announced that it will suspend production at various factories until further government orders. But other companies will do the same too, such as GIS screen supplier and chipmaker Umicron.

Not so much better in the city of Shanghai, also in a state of lockdown and with blocks imposed on citizens and industries. In the city there is a very important reality for China such as SMIC, chipmaker many have heard about US sanctions together with Huawei.

For the moment, these lockdowns are scheduled until March 20, but it cannot be excluded that the date will be postponed if the infections do not decrease. It remains to be understood how the situation will develop in the coming months, also by virtue of the problems of raw materials resulting from the conflict between Russia and Ukraine.