China is experiencing its worst wave of Coronavirus since early 2020, when the first wave of the pandemic emerged in Wuhan. The country has locked down more than 45 million people across multiple cities amid 5,154 fresh cases on Tuesday, compared with less than 100 a month ago. One of the cities under lockdown is the technology hub of Shenzen where authorities have ordered non-essential businesses to close at least until March 20. The city has a population of 17.5 million. Dozens of companies that make everything from printed circuit boards to touch panels, many of which are Taiwanese, have stopped production at their factories in Shenzhen. Contract manufacturer Foxconn, which is the biggest iPhone assembler, resumed partial operations at its two Shenzhen campuses after two days under a strict factory bubble system. Shenzhen is known for its hardware manufacturing ecosystem.
It also has the world’s fourth-largest container port.
Although all smartphones that are sold in India are assembled locally, handset manufacturers still rely on imports from Shenzhen for various vital components. In fact, India’s biggest import from China is electronic components. Of the total imports of $76.6 billion from China between April and January of the current fiscal, electronic components accounted for $8.8 billion. Apple’s second-largest supplier Pegatron is reportedly aiming to start local production in India next month. But potential supply chain issues could put a spanner in the works for the contract manufacturer. Apart from electronic components, India’s top imports from China are telecom instruments, computer hardware, chemicals and pharmaceutical raw materials. 70% of India’s Active Pharmaceutical Ingredient (APIs) requirement is met through China. The new wave is testing China’s zero-Covid strategy which aims to suppress contagion as quickly as possible with snap lockdowns, mass testing and careful contact tracing. Indian manufacturers maintain sufficient stocks that can withstand any short-term supply issues. However, if China is not able to bring the current surge of cases under control, the lockdowns could spread to other parts of the country, leaving India vulnerable to supply shocks. Indian factories will face a shortage of key raw materials that can disrupt production, especially in sectors like smartphones, electronics and pharma.Watch video
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