Epidemic lockdown! How are the situations of major enterprises

On March 16, it was reported that the epidemic situation in Chinese Mainland was becoming more serious, and Shenzhen, Dongguan, Jilin, Shanghai and other places were successively controlled and "closed", and the supply chains of electronic products, automobiles and other products were impacted.

At the beginning of this week, Foxconn's parent company, Hon Hai Precision Industry Co., Ltd., is located in various parks (Longhua, Guanlan, etc.) in Shenzhen, Chinese Mainland, to cooperate with the local government in the epidemic prevention work of COVID-19. The operation will be suspended from now on, and the actual resumption time will be notified by the local government.

In addition, BYD also told the media that the current epidemic has had some impact on production in the Shenzhen park, and the company is coordinating its response. Currently, it is implementing epidemic prevention and control measures in accordance with government requirements.

 

Diversify investments and reduce risks in mobile phone production

In fact, more than 80% of global scientific and technological products have been produced in Chinese Mainland, making Chinese Mainland an important production center of global scientific and technological products. This week, Shenzhen, Dongguan and other places have successively implemented "city lockdowns" or traffic management, and the smartphone supply chain will be the first to be affected.

The editor also believes that compared to automobiles, the supply chain of smartphones faces greater risks, mainly because production capacity is highly concentrated in the Guangdong Hong Kong Macao Greater Bay Area led by Shenzhen and Dongguan, where the epidemic is severe. In particular, the concentration of non Apple phones is higher than that of Apple's supply chain.

 

It is not difficult to find that Foxconn mainly has two major parks in Shenzhen, Longhua Science and Technology Park and Guanlan Science and Technology Park. Foxconn Longhua and Guanlan factories both have IDPBG business group production lines. IDPBG, also known as the "Digital Products Business Group," mainly produces mobile communication terminal equipment and is currently responsible for OEM production of Apple iPhones.

Of course, the editor also understands that the above-mentioned factory is responsible for the production and assembly of accessories for products such as iPads and Apple computers. In addition to Apple products, the aforementioned factory also produces other consumer electronics brand products.

However, in fact, there are three supply chain clusters in Chinese Mainland, namely Guangdong, Jiangsu and inland (Hubei, Henan, etc.). Even if production is affected by lockdowns in specific cities or provinces, dispersed production areas are expected to reduce concerns about capacity disruptions. Taking iPhone as an example, the production capacity in Zhengzhou, Henan accounts for 40%, Jiangsu accounts for 30% to 35%, Shenzhen is less than 20%, and India is even lower than 5%.

 

Although it is necessary to continue observing the recent development and resumption of work, fortunately, due to the fact that the first half of the year is usually the off-season for industries, if the shutdown only lasts for one or two weeks, the possibility of sustained impact is relatively low.

Therefore, overall, the immediate impact on production capacity due to the "lockdown" in places such as Shenzhen is limited. The reason is that there is still inventory as a buffer, coupled with dispersed production bases, which can be flexibly and flexibly scheduled to cope with potential order adjustments without significant immediate impact.

 

Local giants' lying down 'and getting rid of the haze as soon as possible?

Today, the latest news shows that BYD has responded externally that the Shenzhen epidemic has had some impact on the production of its Shenzhen factory, but the impact is not significant.

The editor believes that although BYD has not disclosed a specific shutdown plan, as mentioned above, BYD's "epidemic prevention and control measures in accordance with government requirements" may mean or at least a one week shutdown. In fact, almost at the same time, FAW Group had previously decided to suspend production of all five major vehicle factories in Changchun, Jilin from March 13th. The initial plan was to suspend production until today (16th).

 

It is not difficult to find that as a leading local automobile enterprise in Shenzhen, BYD currently has multiple factories in Shenzhen, including the Kwai Chung factory, Baolongshan factory, and Pingshan factory.

The editor learned that the Shenzhen factory mainly produces BYD's two flagship models, Han and Tang, with a current monthly production capacity of 25000 to 30000 vehicles. In other words, if BYD's Shenzhen factory stops production from the 14th to the 20th, the estimated loss of production capacity could be over 5000 vehicles.

In addition, since the beginning of this year, even though BYD has announced a price increase of 1000-7000 yuan for its related new energy models, the delivery time for its popular models is still very long, with the Song Pro Dm-i and Qin Plus Dm-i models both having a delivery cycle of 3-4 months.

 

Therefore, although the seemingly short-lived 'impact is limited', in the context of high demand and sales growth in the industry, the problem will undoubtedly be magnified. After all, BYD has been facing tight production capacity in the past year, especially for the DM-i model, which has led to frequent complaints from consumers due to long delivery times.

However, it is reported that BYD's eight planned factories may reach an annual production capacity of 3-3.5 million vehicles by the end of this year. Among them, the three major factories in Shenzhen, Xi'an, and Changsha have already started production, and Hefei, Changzhou, Fuzhou, Zhengzhou, and Jinan are expected to start production before the end of this year. Therefore, we also hope that after the epidemic, the above situation will gradually improve.

Summary:

Although, since the tense Sino US trade relations in 2019, well-known brand customers have begun to require the technology hardware supply chain to disperse production bases to regions outside Chinese Mainland, with the goal of removing 15% to 20% of the production capacity by 2023.

But China still holds an irreplaceable position in production and manufacturing. Moreover, the global situation is unpredictable, and given the current situation in Europe, Volkswagen will transfer its production capacity to China and the United States, with priority given to China this year. Obviously, China is still a popular manufacturing powerhouse, and even slight situations can easily cause chain reactions.