Lyra Martin Tech 07.25.2022 07:Jul AM EDT

China Imposes Limits on iPhone Maker, CNOOC to Grapple Covid in Shenzhen

Shenzhen's 100 largest enterprises have been urged to limit their activities to staff who live in a closed loop or bubble and have little to no interaction outside.

China Orders Corporations to Work on a Limited Basis for Seven Days

As the southern industrial powerhouse of Shenzhen fights its most recent Covid epidemic, China has ordered some of its largest enterprises to work under a "closed loop" limited system for seven days. This included iPhone manufacturer Foxconn and oil giant CNOOC Ltd.

The 100 biggest companies in the city, like BYD Co., Huawei Technologies Co., ZTE Corp., and the drone manufacturer DJI, have been asked to restrict their operations to only those employees who live in a closed loop or bubble and have little to no contact with people outside of their facilities or offices.

According to a Shenzhen government report, authorities also requested enterprises to limit unnecessary contact between non-manufacturing personnel and factory floors to minimize infection.

China avoided an economic recession in the June quarter when continuous lockdowns stopped enterprises, destroyed employment, and harmed consumer purchasing. Foxconn Technology Group, which builds most of the world's iPhones, is months away from delivering Apple Inc.'s next flagship gadget.

The action in Shenzhen rekindles the threat of Shanghai-style lockdowns. Quanta Computer, Semiconductor Manufacturing International Corp., and Tesla Inc. operated their Shanghai operations in closed loops during China's deadliest epidemic since Wuhan.

Additionally, China's largest chipmaker, SMIC, lowered its second-quarter expectations, while Apple anticipated supply restrictions would cost $4 billion to $8 billion in sales.

Economists and intellectuals have asked Beijing to soften its Covid restrictions, which have disrupted the economy and sparked demonstrations. Shenzhen authorities requested local regulators to "resolutely" follow President Xi Jinping's Covid Zero instructions.

Shenzhen had 21 new cases on Saturday (July 23), up from 19 the day before. Compared to countrywide, that's a fraction. China's National Health Commission reported 680 cases on July 23.

Stern Covid Protocols in China Hurt Gian Tech Businesses

Texas Instruments, a semiconductor supplier to automobiles and IT companies, lowered its sales forecast on July 19. Microsoft said current lockdowns impacted its performance, and lengthy shutdowns would destroy Xbox and Surface computers.

When manufacturing closed, shipping costs increased. Lockdowns in Shanghai have exacerbated the issues, which may spread to Beijing. In response, Xi Jinping's administration implemented the Zero Covid policy to stop the pandemic's spread.

Others said the lockdowns harmed consumer purchasing. On Wednesday (June 22), officials at MediaTek Inc. advised investors that the business was revising its forecast for worldwide smartphone shipments from a single-digit percentage increase to flat, at around 1.35 billion units.

Samsung and Xiaomi Corp. are two customers of MediaTek Inc.'s smartphone CPUs. They said it is primarily due to a higher decline in China than first anticipated.

After Covid lockdowns were lifted, Apple's iPhone shipments likely surged in China in June, boosting the smartphone sector.

Apple and Samsung boosted China's mobile phone sales by 9.2% last month. It is the fourth-largest participant in the country's smartphone business, suggesting the iPhone's increased demand.