A Covid Lock Down TAKES A BITE OUT OF Apple
China’s determination to fight Covid with lockdowns and quarantines just took a bite out of Apple. The Chinese government has ordered a seven-day lockdown in the area surrounding Foxconn’s main plant. Foxconn is Apple’s primary supplier of iPhones.
Here is how Bloomberg News describes the implications:
China has ordered a seven-day lockdown of the area around Foxconn Technology Group’s main plant in Zhengzhou, a move that will severely curtail shipments in and out of the world’s largest iPhone factory…The abrupt action reflects Beijing’s Covid Zero approach and is likely to further disrupt Foxconn’s main operations base, which cranks out an estimated four out of five of Apple Inc.’s latest handsets.
“China Locks Down Area Around ‘iPhone City’ in Blow to Apple,” Bloomberg news, November 2, 2022
The challenge for all who depend upon China as a manufacturing source is that the lockdowns are sudden and absolute. Just two days ago, the BBC reported that a lockdown at Shanghai Disney resulted in park visitors being stuck inside and unable to leave.
Videos posted on Chinese social media site Weibo showed people rushing to the park’s gates following the announcement but finding them already locked.
Posting on Chinese social media site WeChat, the Shanghai government said the park was barring people from entering and those inside could only leave once they had returned a negative test result.
China Locks Down Area Around ‘iPhone City’ in Blow to Apple, Alex Binley, bbc news,
A number of people with whom I have spoken recently have talked about returning to Hong Kong and China after the first of the year. These kinds of lockdowns may make people wary about what can happen after they arrive.
Hong Kong IS Losing PRESTIGE, PEOPLE, MONEY
Hong Kong, once the business capital of Asia, is feeling the effects of China’s strict Covid policies. Talented people are leaving. According to several sources, 200,000 people, both native and foreign, have moved out since the start of the pandemic. Where are they going? Singapore, which just passed Hong Kong as Asia’s most prominent economic hub.
As you would imagine, Hong Kong’s economy is feeling the effects. Here is how Bloomberg describes the impact on GDP:
Hong Kong’s economy recorded its worst quarter in more than two years as weak demand and pandemic isolation battered the financial hub and increased the likelihood the city will end the year in contraction for the third time since 2019.
Hong Kong’s Economy Records Worst Contraction Since 2020, Sarah Zheng, Bloomberg News, October 31, 2022
Do I Stay or Do I go
I have been hearing stories about significant retailers pushing their suppliers to move out of China. A Wall Street Journal article, “An American Helped Build a Business Inside China. Clients Want Him to Leave,” confirmed the stories.
The piece focuses on one American company to illustrate manufacturers’ challenges when their customers want them to leave China.
Mark Rothman, the article’s subject, makes kitchen utensils for the global marketplace. Here is how he describes his situation:
“There’s not a customer that we have that isn’t pressuring us, suggesting, hoping that we will build factories outside of China,” says the co-chief executive of Velong Enterprises Co., which serves big retailers and consumer brands such as Walmart Inc. and grill maker Weber Inc. Yet “there’s nothing like China,” he added. “We’ve built this supply chain for 30 years to work like a Swiss clock. There’s just nothing like it.”
“An American Helped Build a Business Inside China. Clients Want Him to Leave,” Jason Douglas, Stella YiFan Xi, Wall Street Journal, October 29, 2022
What I found particularly interesting was how Mr. Rothman sized up the alternatives.
Cambodia and Vietnam are promising but far smaller in terms of capacity and population…Factories in Vietnam are already jam-packed and have limited available space. Turkey has gleaming, high-tech factories but is beset by rampant inflation… India has huge potential but needs newer infrastructure, such as better roads
As I wrote this, I could not stop the “Do I Stay or Do I Go” song by the Clash from recycling through my brain. This verse certainly speaks to all of our dilemmas regarding China.
Should I stay or should I go now?
Should I stay or should I go now?
If I go, there will be trouble
And if I stay it will be double
So come on and let me knowShould I stay or should I go?
Do I stay or Do I go, the clash
