A few hours ago we talked about something positive such as the restoration of the stock of graphics cards and how it was going up. Well, new information arrives from China about everything that is happening in the main technological capitals of the country and the reality is harsher than we might think. And it is that China is reducing its activity to the point that it stops the production of chips and directly blocks some companies, a economic loss which we are going to understand next.
China is in a clear economic recession due to various factors where COVID-19 is not helping at any time. For the first time since the beginning of 2019, the Asian country has had to reduce its world production due to the new blow of the variant Omicronbut not everything is bad news there, since it is also reported that the collapse has been lowered due to the drop in demand in the West.
4.2% drop in China and immense economic loss
That the demand has relaxed was expected. It was not known when it would happen with certainty, the war has not helped either and China’s new financial collapse sows global economic doubts, a general scenario that, as we see, is very uncertain.
What we do know are the measures taken by that country in its main technological center that supplies the world, Shanghai, where the month-long blockade and increasingly severe restrictions by the Xi Jinping administration they do not seem to be having an effect in stopping the spread of infections.
The problem is that China cannot stop completely, since companies like SMIC or Hua Hong Semiconductor have to continue manufacturing in minimum orders to fulfill contracts, where there are moments of total stoppages in production. To be more specific, said production fell by 5.1% and as the month progresses, stricter prevention measures are being applied, so that the first problems of interruptions in the supply chain are already occurring and with it the breakage of it.
The Shanghai effect, a blow to all of China
What is happening in Shanghai is a debacle for the entire country, since the factories that depend on everything that is manufactured in their industrial zones could be forced or even forced to stop all their production in just one week if the suppliers of said province are still closed.
The CEO of Huawei left a few brief statements that perfectly show the problem: “The economic loss will be immense”. And it is that if you stop Shanghai you stop half the world for the value of the technology companies that operate there, which is forcing the demand for hardware products and others associated with chips such as smartphones to be entering a recession in their demand .
If the blow is being devastating now that there is a significant slowdown in activity and production, the total closure, even if it is momentary, may mean something worse than what we are seeing: the crisis in semiconductors and chips will not end in 2023 like many others. CEO predicted, the new deadline would go to 2024, where if nothing happens we will finally be able to put an end to everything that the industry is experiencing and especially high prices.
