China’s Silicon Valley On COVID Lockdown, Apple Supplier Shuts Down

China has placed Shenzhen city and the province of Jilin under strict lockdown following the detection of COVID cases caused by the newest B.A.2 omicron subvariant, dubbed as the “stealth omicron”.

Chinese authorities have reportedly recorded 1,337 new COVID cases nationwide on Monday. Jilin, a province in the northeast, recorded a majority of it with 895 cases while Shenzhen reported 75 cases.

The lockdown on Jilin and Shenzhen, estimated so far to last for a week, affects 24 million and 17.5 million Chinese residents, respectively.

While the cases are relatively small to its population, Beijing has been practicing a strict zero-COVID policy. During the lockdown, residents are prevented from leaving their locale, buses and subways have been shut, and non-essential businesses have been closed.

This includes Apple’s (Nasdaq; AAPL) major supplier Foxconn Technology Group–tapped by the firm to assemble iPhones. The city is also the home to the headquarters of telco giant Huawei, electric car maker BYD, and tech giant Tencent, although Huawei is deemed essential due to its virus control measures and is being allowed to continue its operations.

A number of semiconductor and electronic component makers have also announced temporary closure of facilities in Shenzhen. The production snag these lockdowns would cause is feared to lead to shortages in the supply chain, potentially causing prices to even soar higher on the heels record-high inflation rates.

Chinese infectious disease expert Zhang Wenhong said in a business essay that the cases recorded on Monday could be just the beginning of “an exponential rise.”

“But if our country opens up quickly now, it will cause a large number of infections in people in a short period of time,” Zhang wrote in an essay for Caixin.

The lockdown of Jilin is the first province-wide lockdown in China since Hubei–where the epicenter of the global pandemic Wuhan is situated–in early 2020. The country has been sporadically installing strict lockdowns that usually takes weeks as part of its zero-tolerance on COVID.

Shenzhen has been developed by China as one of its economic hubs, surpassing Hong Kong’s GDP in 2019. It’s the third biggest Chinese city revenue contributor after Shanghai and capital city Beijing.

Shenzhen's success overshadows China's other special economic zones -  Nikkei Asia
Source: Nikkei Asia

Information for this briefing was found via Bloomberg, NPR, Wall Street Journal. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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