When Apple announced its latest financial results, the American brand warned that a new round of lockdowns in China could disrupt the supply chain. A new lockdown at the world’s largest iPhone factory could lead to shortages and delays. The zero Covid strategy imposed with an iron fist by Beijing is costing China more and more, but it will also cost Apple dearly.
Do you know the Chinese city of Zhengzhou? It is known locally as iPhone City as it is home to the largest iPhone factory in the world. This factory is operated by Foxconn Technology Group, it designs the iPhone 13, but also the future iPhone 14. It escaped the Covid until now… but it was placed in immediate quarantine after the local government imposed a lock of 7 days as part of Covid-19 control measures.
During this period, employees of government organizations and businesses in major areas of the city will work from home, school classes will be held online, and people will only be allowed to exit and enter Zhengzhou under “necessary” circumstances.
The plant continues to operate, but Foxconn on Wednesday froze its hiring process for assembly line staff until further notice, according to announcements posted on Chinese social media by a number of labor recruitment agencies in China. Zhengzhou. This huge factory typically produces 60-80% of the world’s iPhones, so there could be a big impact on Apple’s supply chain if this site experiences major issues, such as large-scale Covid-19 infections. .
A lockdown in Shenzhen, China last month forced Foxconn to halt iPhone assembly at two factories. So far, iPhone production hasn’t been hit hard, but it’s still an extremely worrying development for Apple. Even a short-term lockdown will have a significant impact, but the far more ominous prospect is that once the infection takes hold in the city, there will be further lockdowns in China.
The zero Covid strategy which will have serious consequences
While most countries around the world have ended lockdowns, such as seen in France with an approach of living with Covid-19, China is maintaining its efforts to completely eradicate the infection. Even though the figures are highly questionable in China, the death toll is indeed ridiculously low compared to most countries. This result is explained by the zero Covid strategy, consisting in strictly applying the triptych “test, trace, isolateand cutting themselves off from the rest of the world.
Unfortunately, with the appearance of a few cases, China finds itself stuck in a health one-upmanship to maintain its zero Covid strategy at all costs. What was seen as effective protection is now what can be called headlong rush. This strategy is a source of social tension and economic disruption that could have serious consequences, not only for China, but also for the entire global economy.
The zero Covid strategy imposed with an iron fist by Beijing is costing China more and more: several institutions have revised their forecasts downwards for 2022 growth, they evoke a growth rate between 4% and 4.5 %, which is much lower than the official target of 5.5%. While Shanghai has been under strict confinement for six weeks, the anger of the inhabitants is rumbling, but censorship is watching.
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