Shenzhen Shut Down Will Further Deepen Electronic Component Shortages

News and Noteworthy

The Shutdown imposed over the weekend has already had a detrimental effect on the World’s biggest electronic manufacturing district. Warehouses are being forced to shut down until at least March 20th. A little over a week doesn’t seem like that big of a deal until you take a deeper look at the ramifications. Shenzhen is now at a stand-still with 17.5 million residents being advised to work from home, non-essential companies shut down by the government, and no outsiders allowed into the area, including trucks carrying factory shipments.

A halt in the production of key electronic components doesn’t just mean longer wait times and shortages, but wasted materials. As factories sit, materials that have a short life, expire and can no longer be used (ex. Adhesives, etc.). Major electronic companies use parts from Shenzhen factories and are now relying on the little stock they have. The already massive shortage in the technology industry will unwillingly be affected for months to come. The best way to navigate the shortage is to find existing stock through excess marketing channels outside of China.

This closure has not just affected the businesses that manufacture chips and electronics, but also their transportation. Yantian Port, which is the 4th largest in the World, remained open Wednesday but is still at risk of being closed. Port workers, truckers and factory workers are staying home due to the recent Covid outbreak, which is causing delays in the movement of containers from the ships at the port. The ships that port at this location carry thousands of containers with materials and parts for the production of electronic components and their final products. With 90% of China’s electronic shipments passing through Yanitan, a closure will take months to navigate the subsequent backlog.

Covid closures in Shenzhen will affect more than just the communities. The backlash will take months to repair and the small steps towards normalization have reversed.

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