Chinese chipmakers ‘wretched’ with blockade

According to Bloomberg, home chip production China’s largest Semiconductor Manufacturing International Co (SMIC) and iPhone assembly service provider Petagon have cut their outlooks for the second quarter of 2022, filling a growing list of manufacturers at risk of being affected. from the strict blockade to prevent the epidemic Covid-19.

SMIC headquarters in Shanghai, China Bloomberg

SMIC estimates a more than a month-long blockade in Shanghai could spur component shortages and logistical confusion, and wipe out around 5% of output in the second quarter. Pegatron has cut its laptop shipments outlook to a 5% to 10% decline from the first three months of this year, down from its previous estimate of a 25% to 30% increase.

“We are doing our best to minimize the impact on product delivery. We are still assessing the actual impact as many suppliers restart their operations,” SMIC Chairman Gao Yonggang told analysts on the morning of May 13. Shanghai-based chip maker Hua Hong Semiconductor also warned on May 12 of the potential impact from lockdowns and logistics disruptions.

Many argue that the Zero Covid strategy is ending China’s huge manufacturing sector, as the rest of world gradually live with the epidemic and reopen production and business activities. The impact has been particularly severe in the eastern region around Shanghai, which has been struggling under lockdown to contain a new outbreak.

However, there are still some companies that are barely affected. Hon Hai Precision Industry Co, also known as Foxconn, which has its main iPhone manufacturing facility in Zhengzhou, expects revenue to be flat this quarter. Foxconn has managed to keep its factories afloat by using a self-contained production site. However, difficulties for manufacturers could deepen, if lockdowns do not end, or if global macroeconomic instability weakens demand for electronics.

Now, while factories have been given special permission to reopen under strict guidelines, supply chain difficulties, from shortages of delivery drivers to shortages of raw materials, continue to disrupt the supply chain. business operations of local companies and major global technology firms such as Sony, Apple and Tesla.

The Covid-19 epidemic in China and the Russia-Ukraine war could also reduce global smartphone shipments by about 200 million this year, according to SMIC CEO Zhao Haijun, “Most of this damage will be caused by Chinese smartphone vendors shoulder the burden”.