Shenzhen lockdown shows tech is still reeling from COVID-19

The United States is continuing to roll back pandemic-related restrictions. But the health crisis is far from over, and it’s about to hit tech manufacturing again: China placed Shenzhen, where Tencent and Huawei are headquartered and Apple supplier Foxconn operates sites, in lockdown for at least a week.

The new restrictions come after the number of reported new cases in the country jumped from 1,100 on Friday to 3,122 on Sunday. The lockdown affects Shenzhen’s 17.5 million residents, who will now need to undergo mass testing. The province of Jilin was also sent into a partial lockdown.

Foxconn stopped production at its Longhua and Guanlan factories, one of which makes iPhones, and said it would move production to other plants in the country. The Apple and Samsung supplier’s Shenzhen base is its second-biggest in China, according to Nikkei. Huawei, Tencent and Oppo are also headquartered in the city.

Companies in Shenzhen supply crucial components to the chip manufacturing tool-makers such as Applied Materials and Lam Research, which are already struggling to get enough parts to build machines. Continued shortages of tool components could hamper big expansion plans announced by the chip manufacturers.

Shanghai, a huge semiconductor hub, also announced restrictions following an increase in COVID-19 cases. Power-management chip packaging and testing firm GEM Services is halting production until tomorrow as a result, Nikkei reported.

The lockdown is relatively short, but it shows how daily life and tech manufacturing are still reeling from the pandemic. Last spring, global shipping rates increased and port operations were delayed following a COVID-19 outbreak in Shenzhen, and when COVID-19 first broke out, nearly every area of tech production was hit.

Paul Weedman, the head of manufacturing consultancy Victure Industrial in Shenzhen, told Reuters that restrictions will impact the company for months. The firm was forced to suspend production and cancel visits.

"Imagine you have a factory of 100 people and all of a sudden you can’t do anything — you can’t fulfill your existing orders, you can’t accept new orders,” Weedman said. “The impact is not two or three weeks, but three to six months."