For the sake of epidemic prevention and control, in the past week, Shenzhen and Dongguan announced the suspension of all non-essential flows. As an important city in the electronics industry and a major foreign trade city, the shutdown of these two cities has affected the hearts of people in the relevant industry chains. But now, they may be able to breathe a sigh of relief.
On March 17, it was mentioned at the Shenzhen epidemic prevention and control press conference that due to the upgrade of prevention and control measures in the recent period, the production and operation of Shenzhen enterprises have been affected. At present, the epidemic prevention and control situation is actively improving, and Shenzhen is promoting the resumption of work and production in an orderly manner.
Shenzhen and Dongguan who press the pause button
Earlier, the Shenzhen Epidemic Prevention and Control Headquarters issued a notice saying that from March 14 to 20, non-urban security enterprises will stop operating or work from home, stop all non-essential flows and activities, and all employees in the city will conduct three rounds of nucleic acid testing.
Up to now, most electronics factories in Shenzhen and Dongguan have announced temporary suspension of production, many of which are “fruit chain” companies. For example, Apple supplier Foxconn said that its factories in Longhua and Guanlan, Shenzhen have been suspended since March 14, and the actual resumption time will be notified by the Shenzhen government. The company has other backup factories and has made necessary production deployment to reduce the impact on the company’s operations.
Another Apple supplier, Lens Technology, announced that the company and some of its subsidiaries have been affected by the recent continuous development of the epidemic at home and abroad. At present, Dongguan Lens has arranged for centralized isolation of employees and suspended production activities. Some raw and auxiliary materials, chips and other materials purchased from overseas encountered certain difficulties in the logistics process, which had a certain impact on the company’s main business.
In terms of transportation, the previous prevention and control notices of Shenzhen and Dongguan mentioned that, in addition to ensuring the operation of the city and the transportation of goods and goods to the port, the city’s buses and subways will be suspended. According to the notice, many warehousing and logistics companies have suspended operations.
For example, Shenzhen Jinyunda International Logistics stated that from March 14, 2022, all warehouses in Shenzhen will suspend the handling of inbound and outbound business, and the specific resumption time will be notified separately. City International Logistics issued a notice saying that since March 16, 2022, the company’s Dongguan Consolidation Warehouse will stop production and stop work.
A Shenzhen semiconductor supplier told a reporter from China Economic Weekly that Shenzhen is one of the main gathering places for chip supply in the country. During the shutdown, the company can only quote and accept orders, but cannot deliver the goods. If customers are in a hurry, they will find suppliers in other cities. As a result, the company’s order volume has declined somewhat. He believes that if the prevention and control measures are only maintained for a week and lifted as scheduled, the actual impact will not be great.
At the same time, from March 14th, Dongguan and Shenzhen will enter the “slow life” simultaneously, strictly control production and operation, and fully implement closed management of factories, enterprises and industrial parks. On March 15, the local government announced that from 12:00 on the same day to 24:00 on the 21st, Dongguan will comprehensively upgrade prevention and control measures, and all enterprises in towns (parks) where local epidemics have occurred will stop production activities; if no local epidemics have occurred, implement Industrial parks under closed management maintain basic production on the premise of strictly implementing various epidemic prevention measures. On March 16, the local government seemed to have tightened its prevention and control policies.
“This afternoon, the town suddenly came to notify that the enterprises in the district would stop work and production.” On March 16, an electronics manufacturer in Qingxi Town, Dongguan told a reporter from China Economic Weekly, “I, along with a few colleagues, Shenzhen suppliers talked about it, and they are in the same state: the goods can’t be shipped, the raw materials can’t arrive, and the factory can’t open. When the Australian customer came to ask about the situation, I was worried that the other party would cancel the order.”
For him, the bigger problem is still after the resumption of work. “The delivery time with customers will be delayed by at least one week to 10 days. It may take another 7 days for freight booking, and now the shipping is relatively tight, I don’t know if it can be ordered to the counter, and the time may be longer. In the past, we communicated with foreign customers. The collection period is 45 days, and now it has to be delayed for at least 60 days. As a result, our payment collection is slow again, and the pressure on capital flow increases.”
According to the above-mentioned sources, the company’s goal this year is to achieve a monthly output value of 6 million yuan, so that the output value will drop by at least 1/4 after a week of shutdown.
What is the impact of the global electronics supply chain?
The Statistical Yearbook shows that Shenzhen’s computer, communications and other electronic equipment manufacturing industries account for 61.4% of the city’s total industrial output value above designated size. Electronic information manufacturing is one of the five pillar industries in Dongguan, and its industrial added value accounts for half of all pillar industries in the city.
At the same time, Shenzhen and Dongguan are also a big market for electronic foreign trade. According to customs statistics, Shenzhen’s export of goods trade in 2021 will reach 1.92 trillion yuan, ranking first among foreign trade cities in the Mainland, of which the export of mechanical and electrical products will reach 1.54 trillion yuan, accounting for more than 80% of Shenzhen’s total export value in the same period; Dongguan’s foreign trade import and export scale in 2021 It ranks second in Guangdong Province, with exports of 955.98 billion yuan, and exports of mechanical and electrical products account for 70%.
As soon as the news of the shutdown of the two places came out, the market paid attention to its impact on the global supply chain.
Huatai Securities research report analysis, the current impact is limited, it is recommended to pay attention to the policy duration. “We believe that the current epidemic prevention policy mainly affects labor-intensive industrial links such as mobile phone assembly and PCB production. Due to the low season of consumer electronics demand, companies can meet customer delivery requirements by deploying production capacity in other regions and closed management. The impact of highly automated links such as round panel foundry is currently limited. At present, what needs to be paid attention to is the impact on the supply chain caused by the disruption of logistics links under the tightening of epidemic prevention policies.”
Wang Guowen, director of China (Shenzhen) Comprehensive Development Research Institute and director of the Institute of Logistics and Supply Chain Management, said in an interview with a reporter from “China Economic Weekly”: “The short-term impact on airline calls and the re-flow of goods is still relatively obvious. Shenzhen and Dongguan’s prevention and control measures will have a certain impact on the global industry, but the impact will be limited.”
Wang Guowen said that from the current situation, first, this is a temporary closure measure during the epidemic. Second, the choice of the global supply chain and some alternative relationships. The scope and time of the impact depends on the epidemic situation. I think it’s controllable and predictable.
These views have been verified.
On March 17, the fourth day after the announcement to stop non-essential flows, Shenzhen held a press conference on epidemic prevention and control. Huang Qiang, deputy secretary-general of the Shenzhen Municipal Government, said that the current situation of epidemic prevention and control is improving, and Shenzhen will make scientific judgments and accurate assessments. Shenzhen will intensify its efforts in corporate services, guide and urge companies to do a good job in epidemic prevention work such as disinfection of factory areas and workshops, temperature detection of employees, ventilation and meal distribution in canteens, and take multiple measures to solve practical problems such as labor, capital, and raw material supply.
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