China’s total output of semiconductors in March declined further from the previous two months, dragged down by supply chain disruptions in manufacturing industries, as the government once again initiated lockdowns and other restrictions under its zero-Covid-19 policy . The country’s production of integrated circuits (ICs) last month dropped 5.1 per cent from a year earlier to 28.5 billion units, compared with a 1.2 per cent decrease in the January-February period, according to data released by the National Bureau of Statistics (NBS) on Monday. The agency, which did not provide a breakdown of chip types, does not publish separate monthly data for January or February. That marked a sharp contrast from March last year, when the total chip output surged 37.4 per cent to 29.1 billion units. NBS data showed that China’s overall first-quarter IC output reached 80.7 billion units, a 4.2 per cent decrease from the same period last year. “The latest lockdown in Shanghai has further aggravated the situation by disrupting logistics and clogging up supply chains, which has affected many small and medium-sized enterprises,” said William Wang, chief executive at Shanghai-based semiconductor manufacturing consultancy IC Cafe. China’s latest Covid-19 lockdowns and travel restrictions have created a nightmare for logistics operators , who are desperate to get cargo to ports and across borders, as the country’s manufacturers and exporters race to meet delivery deadlines. That may further complicate the expansion plans of China’s semiconductor industry amid the US government’s efforts to set up an industry alliance with its Asian allies. “The supply chain instability has prompted firms to be more cautious in placing orders and tightened investments,” IC Cafe’s Wong said. “Without a strong financial stimulus, I suspect the decline in chip output will continue in the short term.” The drop in semiconductor production volume in March comes amid a slowdown in China’s overall industrial value-added output growth, which reached 5 per cent last month, NBS data showed. That was down from 7.5 per cent in the first two months of the year. China’s lockdowns of carmaking hubs Shanghai, Changchun disrupt supply chain The fall in semiconductor output also coincided with decreased car production. China’s car output in March decreased 4.9 per cent from a year ago to 2.4 million units, compared with 11.1 per cent growth in the January-February period, according to NBS data. An electric vehicle (EV) manufacturer like Nio , for example, uses about 1,000 different chips in each car . Nio co-founder and chief executive William Li Bin said in March that the carmaker faces a shortage of 100 such chips, or 10 per cent of what it needs for each vehicle. While China’s new-energy vehicle sector rebounded sharply in March after carmakers managed to get hold of enough components to ramp up production , analysts predicted this turnaround will be short-lived amid supply chain disruptions in Shanghai and other car manufacturing bases. Carmakers may have to stop all production by May if the supply chain disruptions caused by Shanghai’s lockdowns are not resolved soon, according to a blog post by Xpeng co-founder and chief executive He Xiaopeng , whose company assembles EVs in the city of Zhaoqing in southern Guangdong province. Richard Yu Chengdong , chief executive of Huawei Technologies Co ’s intelligent vehicle solutions division and head of its consumer business group, recently made a similar warning. China imports fewer chips as self-sufficiency drive shapes up NBS data also showed that China’s first-quarter industrial capacity utilisation rate in computer, communications and other electronic equipment manufacturing reached 77 per cent in March, down 2.3 percentage points from the same period a year earlier. Despite those headwinds, China’s gross domestic product in the first quarter beat expectations, with a 4.8 per cent growth from a year earlier. Meanwhile, China’s IC imports in the first quarter shrank 9.6 per cent in volume from a year ago, marking a sharp retreat from the 33.6 per cent increase in the same period in 2021, according to figures released last week by the General Administration of Customs.