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How Shenzhen’s new COVID lockdown could hinder your tech-buying plans

The port city’s COVID shutdown is another blow to an already-shocked system.

How Shenzhen’s new COVID lockdown could hinder your tech-buying plans
A volunteer in protective gear guides citizens at a nucleic acid testing site in Luohu District of Shenzhen, south China’s Guangdong Province, March 13, 2022. [Photo by Chu Yan/Xinhua via Getty Images]

Don’t be surprised if TV sale prices become stingier in the months ahead, or if the specific model of laptop or tablet that you’re looking for becomes harder to find.

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Experts say those are two potential outcomes of the current lockdown in Shenzhen, the city in China that serves as a mega-hub for tech manufacturing. China ordered the lockdown on Sunday in response to a surge in COVID-19 cases, potentially tied to an omicron sub-variant, and the mandate will run through at least March 20. Foxconn, which handles manufacturing for Apple and many other major tech firms, has resumed production, but only in a limited capacity (one in which employees live and work in a “bubble-like system,” Bloomberg reports).

The lockdown may not be disastrous for the tech industry if it doesn’t last long, especially because the last two years of supply chain chaos have made tech vendors more flexible. Even so, it could further exacerbate the higher prices and tighter supplies that we’ve all been getting used to lately.

“It’s another shock to the supply chain, which has gotten almost used to new shocks,” says Avi Greengart, the president and lead analyst of Techsponential. “That doesn’t make it any less difficult.”

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Ripple effects

Shenzhen is by far the largest tech manufacturing center in China, which, on the whole, produced 90% of the world’s phones and computers in 2018, along with 70% of its TVs, according to China’s People’s Daily newspaper. For major tech companies, such as Apple, Nintendo, Microsoft, Sony, and Dell—all of which depend on Foxconn’s facilities in Shenzhen—a brief disruption could have a material impact.

Even companies that assemble products outside of Shenzhen, such as Samsung, may still rely on the city to supply storage drives, batteries, or other components, Greengart notes. The centralized nature of Shenzhen as a tech manufacturing hub has also attracted makers of ancillary products, such as specialized screws or product packaging.

“All of this stuff has been built up over the last 20 years in Shenzhen, and it’s become the mega-hub for the consumer electronics industry globally, and right now it’s been turned off,” Greengart says.

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Any resulting ripple effects could extend well beyond the duration of any lockdown. A product that’s being assembled six months from now, for instance, may depend on a component being made in Shenzhen today. Delays on those products, Greengart says, could lead to bidding wars among vendors, in which case, some may have to wait even longer for the parts they need.

“A shutdown of even a few weeks will ripple throughout the supply chain, given that nobody has slack built in, as much as they’re trying,” he says.

Not every expert is as gloomy about the potential outlook. Chip White, a professor of industrial and systems engineering at Georgia Tech, says that vendors have learned to be more agile over the last two years, for instance, by expanding their buffer inventory of components—even though it’s more costly to do so.

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“We’ll see the ripple effect, but—I guess it’s the optimist in me—I think it’s going to settle down faster than it did a couple of years ago,” White says.

Of course, tech companies have also turned to other countries, such as Vietnam and India—and possibly the United States—for component manufacturing, but building new facilities that can produce microchips and other components on a large scale will take years, and matching Shenzhen’s capabilities won’t be easy.

“If you are Apple, and every summer you spin up plans to make 100 to 150 million of something, you can’t move that. Not easily, not anytime soon,” Greengart says.

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Consumer impact

What all of this ends up meaning for tech consumers is a bit tricky to define. We don’t know how long the lockdown will last or what kind of slack—if any—tech companies have managed to build into their systems. And given the vast array of supply shortages and shipping disruptions that have occurred over the past two years, it’s hard to pin a product delay or price hike on any particular issue.

Still, experts believe you’ll be at least mildly inconvenienced by the latest disruption.

“It could be that when you go to Best Buy, not as many television models are on sale, and it may be hard to pick it up specifically when you go to the store,” says Mary Lovely, a senior fellow at the Peterson Institute for International Economics.

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But Lovely notes that we may have gotten used to that by now. Companies have already been raising prices due to a combination of inflation and opportunism, and, she says, those increases may be a way to ration the supply they have. Extended shipping delays for new laptops or tablets aren’t new either, and snagging a new Xbox or PlayStation console still requires jumping through hoops.

As a result, the lockdown in Shenzhen may end up going unnoticed by consumers entirely, even if it becomes a major disruption for the tech industry. This is, in other words, just the new normal.

“I’m somewhat surprised this hasn’t been a bigger story, but maybe we’re just desensitized to it because it’s been some disaster of one kind after another,” Greengart says.

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