Today’s Cache | The effect of locking down China’s ‘Silicon Valley’

Today’s Cache is a daily column dissecting big themes at the intersection of technology, business and policy.

Updated - March 17, 2022 04:21 pm IST

Published - March 16, 2022 03:43 pm IST

Tied down: China’s tech hub Shenzhen, home to 17.5 million people, has been locked down due to rising infections. AP

Tied down: China’s tech hub Shenzhen, home to 17.5 million people, has been locked down due to rising infections. AP

Residents of the city of Shenzhen have been ordered to stay at home due to a renewed coronavirus outbreak. Public transport has been halted as China battles a new wave of COVID-19.

The city of Shenzhen is dubbed China’s Silicon Valley, and nearly 17.5 million people live there. Its factories tool the world with mobile phones, laptops and other gadgets. The country’s best brains build apps and games in the city. Now, a government-imposed lockdown could cause an economic ripple effect across the country and rattle markets.

Most firms have been told to switch to working from home. Its not an easy option for factories, which require physical labour to churn out products. This disruption could further tighten the already fraught global supply chain for goods and services.

China’s fastest growing city is home to tech giants like Tencent and Huawei, and ranks third among Chinese cities in economic output. That means a sustained closure could have affect commerce is several parts of the country and the world.

Mechanical and electronic products make up 80% of exports from the southern powerhouse, which neighbours Hong Kong.

Foxconn, a major supplier to Apple, has already suspended operations in the city, and other tech manufacturers are halting some amount of production.

At least six other suppliers to the iPhone maker are based in Shenzhen, and BYD, China’s EV maker, also produces its car in the city.

The stay-at-home restrictions across the country could further hit key manufacturing hubs, and add pressure on China’s growth target.

In earlier COVID-19 outbreaks, the Yantian port, among the world’s busiest, was forced to suspend the processing of containers, leading to backlogs. The current outbreak adds to worries over already-high shipping prices. It is the largest single port in China, and some economists note that it accounts for 10.5% of China’s foreign trade container throughput.

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