End of Shanghai lockdowns to alleviate tech supply issues
China's most populous city is poised to lift its lockdown on Wednesday, which should help to ease the tension in global tech supply chains.
Shanghai's limited lockdowns began in mid-March, as the city struggled to contain the country's biggest coronavirus outbreak since the start of the pandemic. Following the April escalation, officials imposed city-wide restrictions, which have been in effect since then.
The lockdowns have caused significant anguish in Shanghai, which is a major manufacturing hub in China - one of the few countries still following a zero-Covid strategy.
Data and networking giant Cisco stated earlier this month that China's aggressive shutdown resulted in supply shortages costing the firm $300 million, or nearly 2.5% of its revenue. Concerns about Chinese imports prompted Cisco to lower its forecasts for both the current quarter and the whole fiscal year.
Foxconn, Tesla, and Toyota are among the other companies that have stopped or halted production following the lockdowns in Shanghai.
Quanta Computer, Compal Electronics, Wistron, Inventec and Pegatron, all of which have facilities in Shanghai, reported double-digit revenue falls in April compared to the same month last year owing to production line interruptions.
According to Japan's Nikkei, which cited people with knowledge of the matter, the lockdowns have caused development of one of Apple's upcoming iPhones to slip behind schedule.
Shanghai officials now claim that the virus's spread has been contained to their satisfaction, and that the city may reopen with minor restrictions in areas where no infection has been discovered for 14 days.
Officials announced during a news briefing on Sunday that 1,700 key "production-oriented" firms in the area, 580 foreign trade enterprises, and 450 financial institutions have re-opened and resumed production.
Many public transport services have also resumed, and local businesses and shopping centres are slowly reopening in the city.
According to reports, Tesla's Shanghai facility has restored weekly output to approximately 70% of what it was before to the city's most recent lockdown.
Shanghai's authorities have also launched subsidy programmes for some businesses, such as software development.
Premier Li Keqiang addressed a key meeting last week, urging local governments to take steps to boost economic development in the second quarter and reduce unemployment.
While the Shanghai lockdown may end on-time, the impacts on the economy could last much longer.
China's economy has suffered in 2022 as a result of lockdowns. Retail sales have fallen more than 11% year-on-year, and industrial production is down 2.9% - the first time that has happened since March 2020.
Lockdowns have also affected local e-commerce giants JD and Alibaba.
A recent survey by the European Union Chamber of Commerce in China showed that 23% of respondents are considering shifting current or planned investments out of China to other markets, as a result of the country's Covid policy. The figure has more than doubled since the beginning of 2022, making it the largest percentage considering abandoning China in the past decade.