May 28, 2022

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China's restrictions on the emerging corona virus (Covid) hit Toyota, Volkswagen and Apple supplier Foxconn

China’s restrictions on the emerging corona virus (Covid) hit Toyota, Volkswagen and Apple supplier Foxconn

A medical worker in a protective suit takes a swab from a nucleic acid test worker at a Foxconn plant, after new cases of the coronavirus disease (COVID-19) in Wuhan, Hubei Province, China, August 5, 2021. Photo taken on August 5, 2021. China Daily via Reuters

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TAIPEI/BEIJING (Reuters) – China’s efforts to curb the largest spread of the COVID-19 virus in two years have prompted Apple (AAPL.O) Suppliers like Foxconn to Toyota automakers (7203.T) and Volkswagen (VOWG_p.DE) to suspend some operations, raising concerns about supply chain disruptions.

Several Chinese provinces and cities have tightened restrictions in line with Beijing’s zero-tolerance goal of suppressing infection as quickly as possible, among them the South China Technology Center in Shenzhen. Read more

Shenzhen, China’s Silicon Valley, is conducting mass testing after recording dozens of new domestic cases. Officials have suspended public transportation and urged people to work at home this week as much as possible. Read more

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China has reported more cases of localized COVID-19 so far this year than it did in all of 2021. Read more

Foxconn, formally known as Hon Hai Precision Industry Co Ltd, said its Shenzhen operations will be suspended until further notice, adding that it will deploy back-up plants to reduce disruption.

Two sources familiar with the matter told Reuters that operations of Foxconn and its Shenzhen affiliates would be suspended for the first half of the week.

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One person said the government would allow companies to operate if they could create a “closed management” system where employees would live and work in a bubble. Such a system was implemented during the Winter Olympics in Beijing.

Other Taiwanese companies that have said they have suspended operations in Shenzhen include chip substrate and printed circuit board maker Unimicron Technology Corp. (3037.TW)which also supplies Apple and Intel, and flexible printed circuit board maker Sunflex Technology Co Ltd.

Sunflex said its plant will be closed through Sunday.

Apple did not immediately respond to requests for comment. Intel declined to comment.

Paul Weidmann, who runs the Shenzhen-based Victor Industrial Consulting Limited, warned that the restrictions were having a ripple effect beyond Shenzhen into the broader Guangdong province. He explained that production has been suspended for some of his customers’ orders and many factory visits have been cancelled.

“Imagine you have a factory of 100 people and suddenly you can’t do anything – you can’t fulfill your existing orders, you can’t accept new ones. The effect is not 2 or 3 weeks, but 3-6 months.”

Yantian International Container Terminal (YICT) in Shenzhen, one of China’s busiest, said in a WeChat statement that it was operating normally, although two companies with warehouses at the port said they needed to temporarily suspend operations.

CHANGCHUN LOCKDOWN

Other cities have enacted restrictions to varying degrees. Officials closed Changchun, the capital of northeastern Jilin Province, closed schools in the financial hub of Shanghai and suspended public transportation in the manufacturing hub of Dongguan.

Toyota (7203.T) On Monday, it said its joint venture with China’s FAW Group had suspended production in Changchun, while its operations in Tianjin were not affected.

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Volkswagen (VOWG_p.DE), which also has a joint venture with FAW, said it has suspended production at its auto and component plants from Monday to Wednesday. FAW, which is headquartered in Changchun, did not respond to a request for comment.

A factory owner in Dongguan, who gave his name as Lao, said his factory was forced to close from Sunday through Tuesday. He added that they were also facing some problems in sourcing materials from suppliers due to virus restrictions.

“I hope they will allow us to continue production soon,” he said. “There is not much we can do. The whole world has moved, except for China. They should just abandon the strategy of eliminating the coronavirus.”

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(Additional reporting by Sarah Wu, Ben Blanchard and Yimou Lee in Taipei and Norihiko Shiroso in Beijing; Additional reporting by Josh Horowitz in Shanghai and Stella Q in Beijing; Reporting by Brenda Goh; Editing by Christopher Cushing, Muralikumar Anantharaman, Jane Wardle and Nick McPhee

Our criteria: Thomson Reuters Trust Principles.