Integrated Micro-Electronics factories in China closed for COVID lockdown
The Ayala Family-owned electronics manufacturer said yesterday that its factories in Shenzhen, which contribute around 10% to Integrated Micro-Electronics' [IMI 8.47 0.35%] annual revenues, will be closed until at least March 20 due to the lockdown of all non-essential businesses in the city to combat a recent spike in COVID cases.
Shenzhen is a city with over 17 million residents (more than the official Metro Manila count), and as a tech and manufacturing hub for many global corporations, a lockdown there could have consequences for supply chains and companies all around the world.
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It will be interesting to see how the ultra-contagious nature of the Omicron variant and China’s “COVID Zero” policy interact.
China has shown its willingness to use heavy-handed measures like lockdowns to combat outbreaks, and we all remember how those policies decimated earnings for businesses that were not deemed essential enough to remain open.
We also all remember how lockdowns that were intended to last only one or two weeks can easily be extended indefinitely, depending on how the containment measures of the government work (or don’t).
One week is probably not a huge deal to IMI, but the possibility of lockdowns increases the risk of supply chain interruptions and logistics issues even if the factory doors are open and regular working hours are restored.
Other PSE companies have considerable exposure to China, like Jollibee [JFC 218.40 5.04%], and are also not likely to remain open during any kind of lockdown.
JFC has a few locations in Shenzhen that will be affected, but again, a week is probably not a big deal. All eyes will be on how China administers the lockdowns.
If the Shenzhen lockdown gets extended, or lockdowns are announced in any other major city, it might be time to reassess projections for companies with significant exposure to China.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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