As the southern manufacturing powerhouse of Shenzhen battles its most recent Covid cases, China has once again forced some of its largest enterprises, including iPhone manufacturer Foxconn and oil giant CNOOC, to work within a "closed loop" - a limited operating system that only lasts for seven days.
WUHAN, CHINA - APRIL 11: (CHINA OUT) The construction worker wearing a mask passes a large outdoor advertisements for the Apple iPhone 13 Pro near Wuhan International Plaza on April 11, 2022 in Wuhan, Hubei province, China. According to local media reports the first Apple store will open in Wuhan International Plaza while the 44th in the mainland.
100 Businesses In A Closed Loop
As reported by Bloomberg, the 100 largest businesses in the city, including the automaker BYD, the networking companies Huawei Technologies and ZTE, and the drone manufacturer DJI, have been required to limit their operations to only those employees who live within a closed loop or bubble.
According to a Shenzhen government notification obtained by Bloomberg News, authorities encouraged businesses to minimize unnecessary contact between non-manufacturing personnel and factory floors to prevent the spread of the COVID-19 virus.
It is worth noting that China barely avoided experiencing an economic recession in the June quarter due to various lockdowns that closed down enterprises statewide, reduced employment, disrupted supply chains, and affected consumer purchasing.
This new enforced system comes months before Foxconn Technology Group, which manufactures the majority of the world's iPhones, is scheduled to deliver the newest model of Apple's flagship product.
With this new system in place, China might suffer the same disruptions it faced after the lockdowns in Shanghai.
China's Covid Zero Policy
Even though several countries in the world have seemingly controlled their COVID-19 cases and returned to their pre-pandemic operations, China's Covid Zero policy will employ quarantines, lockdowns, closed borders, and mass testing.
The Shenzhen move raises the prospect of lockdowns similar to those in Shanghai that sent tens of hundreds of workers into seclusion.
When China's financial center suffered the largest outbreak since Wuhan, companies including Tesla, Apple supplier Quanta Computer, and chipmaker Semiconductor Manufacturing International operated their Shanghai facilities in closed loops for weeks or months.
SMIC, the largest chipmaker in China, was one of the businesses to lower its second-quarter forecast, and Apple estimated that supply bottlenecks would cost the company between $4 billion and $8 billion in revenue, according to Bloomberg.
Health authorities state that Shenzhen reported 21 cases on Saturday, up from 19 the day before. Comparatively speaking, that is a small number since the National Health Commission reports that China reported 680 cases on Sunday.
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Written by Joaquin Victor Tacla
