Production resuming in China, but travel bans cripple shipping

An article written by Anne-Françoise Pelé for EETIMES – China’s manufacturing plants have resumed work, but it is far from business as usual. Will it ever be? Will China be able to remove the stigmata of the vicious Covid-19, and achieve full recovery any time soon? 

With analysts on the ground in Asia, market research firm Yole Développement has a clear understanding of the supply chain disruptions triggered by the coronavirus outbreak. 

On a visit at its headquarters in Lyon, EE Times had a discussion with Yole’s president and CEO Jean-Christophe Eloy. Given the potential risks, diversifying the supply chain is no longer an option, it is a primary necessity. 

This wasn’t predicted
February 10th marked the first working day in most parts of China after the Lunar New Year holiday had been extended. STMicroelectronics resumed production at its Shenzhen plant, Airbus restarted operations at its Tianjin final assembly line, and Foxconn partially restarted production at its Zhengzhou plant. 

Factories may rumble back into action, but companies continue to face labor shortages. “This is particularly affecting the electronics manufacturing services (EMS) companies, compared to the front-end manufacturing where there is a lot of automation,” said Eloy. 

A second factor is slowing China’s efforts to revive the economy, one that was not forecasted, Eloy said. To contain the spread of the epidemic, the Chinese government has taken strict measures. Hubei province has remained sealed off for almost a month, restricting the movement of more than 50 million people. Roads are blocked. Airports are closed. Railway stations are shut down.

“That means the supply chain is broken, not because nobody is manufacturing, but because components are not moving from one part of China to the other,” said Eloy. “Nobody and nothing is moving.”

Companies anticipated that production would be severed in some parts of China and started to define alternative plans. However, they did not predict that transportation would be at a standstill for so long. “Even if plants are working, products can’t be shipped to the next level of the supply chain.” 

In a well-oiled procurement management plan, system companies receive and assemble all the components that go inside their systems. Just a grain of sand in the machine, and it gets blocked. Just one missing part in the supply chain, and system companies can’t deliver. “It takes time to get all parts back on track, much more time than the workers coming back to the factories,” said Eloy. “All the supply chain has to be up and running to be able to restart, and when you have 200 suppliers across China, it is a huge problem. Even if the factories are able to produce, they are not delivering, and from what I have seen and heard from our customers, this was not planned as a risk management.” 

Unblocking the situation and having the supply chain back on track, however, would not take very long, said Eloy. One month, or a month-and-a-half at the most, “because everybody will be pushing and rushing in that sense.” Once the Chinese government has decided to lift all the barriers to road, rail and air transportation, “it could go fast.” Full story


Related presentations

Liked this post?

Share it on your social networks