Changes in China Causing Disruptions to the Supply Chain

2022 has brought many changes to the electronics supply chain, but one of the most notable differences has been trade relations between the U.S. and China. From environmental strains to geopolitical changes to further disruptions from COVID-19 shutdowns, there are many disturbances to the supply chain to be aware of within China.

COVID-19 Shutdowns

Ongoing COVID-19 restrictions are continuing to create dilemmas in the supply chain. Various regions of the country have gone into lockdown multiple times throughout 2022, including their largest centers for manufacturing—Beijing, Shenzhen, and Shanghai—on several occasions.

Additionally, restrictions are causing difficulties in travelling around the country or outside of it. Travel into China requires a quarantine period and is sometimes prohibited from certain countries.

Environmental Disturbances

This summer, China experienced a record-breaking 70-day heatwave, with the highest temperatures they have seen in more than sixty years. During this time, water resources depleted, and factories shut down to preserve hydropower resources. After any heatwave of this magnitude, there is always an increased concern of flooding. With Typhoon Muifa shortly after, the country was on high alert.

While we have not seen substantial effects from these environmental effects since these occurrences. However, there were considerable disturbances during the shutdowns that required higher attention.

Geopolitical Relations

Now, U.S. President Biden has initiated new sanctions against China based on the Cold War-era Wassenaar Arrangement. This was a policy ensuring national security between numerous countries by increasing transparency in arms trading. These strategies are working to put a temporary checkmate on China. This is because they ban exports of GPUs, chipmaking tools, and design software out of the U.S. and into China. The ban places a “temporary checkmate” on China to prevent growth of their foundry industry and inhibit advancement, as EPSNews analysts express.

In turn, companies in America are experiencing limits on who they can or cannot work with, and Americans working in China are having to choose between living and working in China or returning home. Because of this, Americans are leaving in droves creating an intelligence shortage at tech companies that must be filled. Moreover, China’s relations with Taiwan are continuing to grow increasingly tense. This will continue to cause major dilemmas for the EMS and ODM customers that are headquartered in Taiwan but have manufacturing facilities within China.

Overall Impacts

Overall, the supply chain has been affected greatly and will continue to be affected as restrictions increase and environmental disturbances continue to occur. This will cause major delays in certain parts of the supply chain and is raising strains between the U.S. and certain allies.

As the trade wars continue, more fabs are moving out of China, impacting semiconductor manufacturing which has experienced significant disruption over the last three years. Not only this, but manufacturers are moving out of China and into Southeast Asia and Mexico, creating fluctuations in demand as EMS and OEMs continue to adjust.

To learn more about how these changes could affect your supply chain, contact your Converge representative today.



China Sanctions Will Further Disrupt the Supply Chain


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