One of the world’s largest electronics manufacturing hubs near Shanghai is coming to a standstill, fueling economic concerns in China and increasing disruption to global supply chains.

On Wednesday, dozens of makers of key electronic components halted production at their factories in Kunshan, a city near Shanghai. Companies and analysts said the shutdown was inevitable after the lockdown rules, which initially only applied to Shanghai, were extended to Kunshan.

“The situation in Kunshan changed overnight. While factories there used to be able to operate under so-called ‘static management’, they are now turning to systems like Shanghai’s, which categorize areas as closed based on when they were last infected. , restrict or protect,” said Patrick Chen, head of research at brokerage CLSA in Taipei.

Production disruptions increase risk China’s economy slows. On Monday, Premier Li Keqiang warned for the third time in a week of the danger posed to the economy by epidemic control measures.

New cases in Shanghai hit a record high on Tuesday after falling the previous day, official data showed. The city has a total of 26,330 confirmed cases, under a huge blockade to stem China’s worst virus outbreak in two years.

Authorities draw up a blueprint relax some measures Residential areas that had no cases in the previous two weeks were allowed to reopen. But lockdown restrictions remain in place in much of China’s largest city, with residents complaining about difficulties ordering food online. US State Department Non-essential consular staff were ordered to leave Shanghai this week.

The lockdown has also affected freight companies, prompting warnings of a deeper impact on global trade.However, the port of Shanghai passes the so-called closed loop systemworkers remain on site.

Economists at Nomura estimate that 45 cities and 373 million people are under full or partial lockdown in China, compared with 23 cities and 193 million people a week earlier.

U.S. dollar-denominated Chinese imports fell in March from a year earlier for the first time since August 2020, a sign of growing trade pressures. Exports increased by 15%.

Production delays in the electronics industry make it the latest industry to be restricted. Electric car maker NIO Suppliers in Shanghai and elsewhere have stopped production and will suspend deliveries, it said over the weekend.

On Wednesday, more than 30 Taiwanese electronics makers announced the closure of factories near Shanghai.

Leading printed circuit maker WUS said its two Kunshan-based subsidiaries had ceased production. LCD backlight maker Coretronic announced a week-long shutdown at its Kunshan plant, while Wise Pioneer, a supplier of machinery that makes electronics such as flat-panel screens and lenses, said it would extend the shutdown for another week.

Pegatron, the contract electronics maker that assembles some iPhone models for Apple, suspended production at two factories in Shanghai and Kunshan on Tuesday.

Analysts said the shutdown could exacerbate parts shortages.

“Even if some companies are allowed to continue production, their utilization rate has dropped to between 40% and 60%. Raw materials can’t go in, and finished products can’t go out,” Chen said.

Analysts expect the supply of printed circuit boards, used in nearly all electronics, and casings for smartphones and laptops to be the most affected by the factory closures.

The impact on Apple is expected to be limited as demand for Pegatron-assembled iPhone models, the 13 mini and SE3, has been sluggish, while iPhone 14 production will only increase towards the end of the third quarter.