What just happened? Just as we were seeing signs that the chip shortage was improving, the crisis has potentially been exacerbated. First by the invasion of Ukraine, and now through an outbreak of Covid-19 cases in the Chinese tech center of Shenzhen.

Apple supplier Foxconn and several other manufacturers have suspended production in Shenzhen following a rise in Covid-19 reports. Sixty new cases were reported Sunday, and now all businesses except those that supply food, fuel, and other necessities have been ordered to close or work from home, reports AP. Additionally, all 17.5 million residents must undergo three rounds of testing.

Those infection numbers are low compared to most other countries, but China has an extreme “zero tolerance” strategy that sees quarantines and lockdowns of entire communities or cities even if just a few Covid-19 cases are discovered.

Foxconn, the world’s biggest contract manufacturer of electronics that counts Apple and Samsung among its customers, has suspended production at its Longhua and Guanlan factories until further notice, though it will use sites in other cities to support production. The firm's touch panel subsidiary, General Interface Solution (GIS) Holding, is also halting production.

A subsidiary of Taiwan’s largest circuit board maker, Unimicron, is stopping production from today, writes Nikkei Asia. Some of China's largest tech companies have their headquarters in Shenzhen, including Huawei, Tencent, and Oppo.

Shanghai, home of chipmaker SMIC, is also introducing restrictions today, including the suspension of buses to other provinces and requiring a negative PCR test from anyone attempting to leave or enter the city.

GEM Services, a Taiwanese power-management chip packaging and testing company, is suspending production at its Shanghai plant.

There are concerns that the lockdowns will impact supply chains in a chip industry that had been showing signs of improvement recently. The market is also dealing with the Ukraine invasion. Around half of the world's supply of neon—needed for the lasers used in chip manufacturing—comes from two companies in Ukraine, both of which have ceased production since Russian forces attacked the country.

Photo by Robert Bye