China’s semiconductor supply chain is facing fresh risks after the local authority in Zhangjiang, known as Shanghai’s Silicon Valley, extended a strict lockdown in residential areas to contain an Omicron outbreak, following similar disruption in industrial hubs such as Xi’an, Suzhou and Shenzhen. The Zhangjiang Town authority on Friday extended a strict lockdown for an unspecified length of period, after three rounds of mass testing were conducted in locked communities over the past week, according to a notice. While the lockdown does not cover the neighbouring hi-tech park where the factories and offices of China’s leading semiconductor firms are located, the residential area under restriction is popular with workers at the park. A number of businesses inside the park have suspended some operations, with people working from home where possible, as new cases of the Omicron variant of Covid-19 surge in Shanghai. The city is now battling its worst outbreak of Covid-19 since 2020, with local authorities struggling to ensure business continuity while the overriding policy aim is to stem the highly contagious coronavirus variant as quickly as possible. Shenzhen reopens after Covid lockdown but controls stay in place for some Zhang Xiaonan, a Shanghai resident, said her father’s company inside the park has been under lockdown since Thursday, with all employees forbidden to enter the building until further notice. However, several key factories in the area have said they are managing to maintain production. Hua Hong Semiconductors, which has a huge factory in Zhangjiang, said it has maintained full-scale operations. Semiconductor Manufacturing International Corp, China’s largest semiconductor manufacturer, told the Post on Friday that its factories in Shanghai were cooperating with the local government on Covid-19 prevention measures and that its production and operations remain normal. Xie Ruifeng, a senior analyst with Shanghai-based semiconductor research firm ICwise, said that most fabs would not shut easily given that the potential impact on production could be huge. In a previous lockdown in Xi’an, Samsung Electronics’ local semiconductor factory opted to maintain production, while in an earlier Suzhou lockdown, some companies were forced to suspend operations temporarily. Meanwhile production at Hejian Technology Corporation in Suzhou, which makes chips for the automotive, consumer electronics and industrial manufacturing sectors, ceased briefly last month after one employee tested positive for Covid-19, according to the factory’s owner, Taiwanese chip maker United Microelectronics Corp. Chinese tech hub Shenzhen eases lockdown restrictions in industrial areas The fresh disruption comes after a dip in semiconductor output and imports in the first two months of 2021, amid an ongoing global chip shortage. China’s imports of semiconductors fell 4.6 per cent compared with the same period last year, marking the first year-on-year drop since the beginning of 2020. China’s integrated circuit output in the first two months fell 1.2 per cent, a rare drop. Concerns are mounting that China’s semiconductor manufacturing and packaging value chain could be affected badly if Shanghai eventually decides to impose a full lockdown in Zhangjiang, the hi-tech heart of the city where many chip-related businesses are based. This would add to delays in logistics flows in the southern tech hubs of Shenzhen and Dongguan, cities which have also been battling Omicron outbreaks. The exact degree of disruption is hard to measure but there are signs that the problems could spread if more regions restrict people and cargo flows due to coronavirus control measures. Back in Zhangjiang, a blogger on home quarantine issues who goes by the pseudonym of Cai Zhang Jiang, has been using a drone to keep a watch over the neighbourhood. The blogger said at least 30 living compounds were under strict lockdown and residents there were waiting in long queues to receive Covid-19 tests on certain days. Meanwhile one Weibo user - who described himself as a tech worker in Zhangjiang - said he had been stuck inside an office tower along with several colleagues for several days after a lockdown order was imposed.