MASHABLE: Integrated circuit output fell by 4.2% in the first three months of the year, with chipmakers reporting a steeper decline in March.

Since early 2019, China's quarterly semiconductor production has been shrinking as the demand for consumer electronics has weakened and lockdowns triggered by Covid in regions including Shanghai have disrupted production.

Integrated circuit output fell by 4.2% in the first three months of the year, with chipmakers reporting a steeper decline in March, according to NBS data. After an 8.7 percent drop in chip output in the first quarter of this year, this was the worst quarterly performance for the country since then.

Shanghai, a major chip-making center, has been placed under a month-long lockdown by the Chinese government in an effort to stop the spread of Covid infections. As a result, some of the country's largest chipmakers, such as the Semiconductor Manufacturing International Corp and Hua Hong Semiconductor, have had difficulty obtaining some components. In the month of March, chip production fell by 5.1%.

As more regions announced stricter prevention measures in response to reports of local Covid cases, a number of Chinese auto and hardware company executives expressed concern about supply chain disruptions last week. China's largest iPhone factory is located in Zhengzhou, which is home to the tech manufacturing hub Kunshan.

Richard Yu, executive director of Huawei Technologies Co., wrote in a WeChat post last week that if suppliers in Shanghai remain closed, factories across the country could be forced into a production halt after May.

"The economic loss will be enormous," said Yu, who is in charge of the Chinese company's smartphone and smart car divisions.

Despite the lingering Covid infections in China's largest city, the Ministry of Industry and Information Technology has sent representatives to assist chip companies in Shanghai in resuming production.

For a long time, Beijing viewed its domestic chip industry as a strategic asset in the city's quest for technological dominance. China's chip production has grown by double digits for years despite the trade war with the United States, although the China Semiconductor Industry Association estimates that China will import more than US$432 billion worth of chipsets in 2021.

Sluggish demand from the consumer electronics sector also bodes poorly for some Chinese chip firms. TSM chairman Mark Liu said that China's lockdown measures have harmed demand for smartphones, PCs, and TVs.

"Demand from smartphones and some consumer electronics is very weak," Jefferies analyst Edison Lee wrote in a note this month.

However, "how long it will take for that weakness to be transmitted to foundries remains uncertain," Lee said in an interview.