Last week, we made the case that tech manufacturing was uniquely vulnerable to pandemic problems, from a combination of just-in-time manufacturing practices and a far-flung network of suppliers. But just a week later, the news is even worse.
On Friday morning, analysts at S&P’s Panjiva Research laid out a grim picture, with US sea imports from China (which includes most of the electronics you buy) down more than 50 percent in the first three weeks of March, a result of the countrywide lockdown in China. At the same time, the subcontracting companies that actually build the hardware (the most famous is Foxconn, but of course there are a lot of them) are thinking about getting out of China entirely, at least as much as they can. Wistron Corp, which does a lot of work for Apple, boasted last week that it could move as much as half of its business outside Chinese borders within a year.
It’s a huge sea change for tech manufacturing, and while it has been building for a long time, it’s going to be a lot faster and messier because of the pandemic. It also means that, while these companies are scrambling for labor and parts, they’re also going to be scrambling to stand up a whole new set of factories.
At the same time, there are real concerns about the supply chain for lithium. A Benchmark report lays out the quarantine situation for a number of major lithium exporters, from Australia to Chile, and while there haven’t been any intense shortages yet, mines are having a lot of trouble getting shipments out. “It’s not the orders and it’s not the production, it’s [about] can we get it shipped?” one mining CEO said. “Can we get the vessels? Can we get the containers?” The result will be a lot less lithium for manufacturers, which could be a huge problem for anything with a battery.
It’s hard to say what all this adds up to. It’s getting harder to make electronics, but with so many people out of work, there is less demand to meet. If the factories are half-closed, maybe it doesn’t matter if the lithium shipment comes in a little late. The current situation is so chaotic that it’s hard to be sure of anything. But the result is scary news for anyone trying to get a shipment of phones out on time — and you can be sure there is a lot of chaos happening behind the scenes.
Coronavirus lockdowns are wreaking havoc on Chinese factories and rare earth mineral miners, with scary implications for hardware companies in the months to come