technology supply chain China is facing the double challenge of falling demand and staffing chaos after the government abruptly changed its Covid-19 epidemic control measures.
In, according to Nikkei Asia a sign of the gloom for consumer electronics, Apple informed some supply chains in China to produce fewer components for AirPods, Apple Watch, and MacBooks in the first quarter. this first, with the reason of weak demand.
An Apple supply partner manager said: “Apple has informed us of a reduction in orders for most product lines since the fourth quarter of 2022, partly due to weak demand. The supply chain in China is still struggling to cope with the latest sudden policy changes, leading to labor shortages due to a sharp increase in Covid-19 infections.
strictest Zero-Covid policy China’s shift came in early December when the government began lifting the world’s, including mass testing and isolation, in an attempt to boost the economy. Manufacturers initially welcomed the change after years of struggling to stay afloat, but now face a surge in virus infections and lax controls.
“The situation is very chaotic,” said the director of an electronic component maker for Samsung, Apple, and several other smartphone makers. The new wave of Covid-19 is spreading very quickly and most companies find it pointless to isolate their employees.
An employee at smartphone maker Honor described workers as largely accepting the infection, saying it’s also good to get infected early to avoid disrupting the company’s work in the new year.
With the new policy, local governments in Zhejiang, Chongqing, and Anhui provinces have announced that workers, including medical staff, who are asymptomatic or have only mild symptoms can return. work, but appropriate protective measures are required. Meanwhile, the Jiangsu provincial government no longer interferes with factories’ disease control measures, and most factories require workers with mild symptoms to return to work.
However, some analysts fear the sudden change in Covid-19 policy could have a knock-on effect on the Chinese economy, where key performance indicators will remain weak or even fall further. in December due to a spike in the number of infections. Even so, some analysts believe the impact won’t last long if most cities peak at the end of the lunar year.
In addition, some believe that when demand is still slow, it is better to pass the peak of the epidemic to be ready when the economy recovers. The manager of a printed circuit board supplier to Apple and Intel in Jiangsu said that more than half of its employees have tested positive, leading to production disruptions, but due to low demand, All employees are on leave.
In general, many suppliers believe that the increase in Covid-19 cases will not have a significant impact on overall order fulfillment because orders have decreased in the period near the end of the year. Notably, many tech manufacturers don’t even want to cut staff despite the bleak demand outlook due to fear of repeating the worker shortages they experienced in 2022. Foxconn, the world’s largest iPhone, in Zhengzhou, which suffered a labor shortage due to the Covid-19 outbreak at the end of October 2022, now offers bonuses of up to $2,013 and requires workers to refer new people.
Other manufacturers in the technology supply chain, including Jabil in Chengdu, Pagatron in Shanghai, and LY iTech in Shenzhen, also increased wages and bonuses earlier this month after a large number of workers. Leave work during the Covid-19 outbreak or return home early to celebrate the Lunar New Year during the holiday that begins on January 20.