Covid surge in Southeast Asia hits global chip supply hard
Southeast Asia’s crucial tech supply chain has been hit by record levels of Covid-19 infections, a development that could exacerbate a global chip shortage.
Malaysia and Vietnam, economies that play a pivotal role in the production of electronics as well as the packaging and testing of components that go into everything from vehicles to smartphones, are facing their worst epidemics since the start of the decade. the pandemic.
The situation threatens to further compress the global technology supply chain, especially for products requiring semiconductors. The chip industry has been hit by the confluence of a global shortage and growing demand as lockdowns restrict people to their homes.
Southeast Asia is a significant player in terms of its role in manufacturing passive components, which include resistors and capacitors used in smartphones and other products, said Gokul Hariharan, co-head of research on technology, media and telecommunications in Asia at JPMorgan. About 15 to 20 percent of the world’s passive components are made in the region, according to the bank.
“It hasn’t reached a stage where it’s an obstacle, but it’s something to watch out for as it has gradually worsened,” Hariharan said.
More than 50 international chip suppliers operate manufacturing plants in Malaysia, which is also home to extensive semiconductor conditioning and testing facilities. The country recently imposed its fourth lockdown as it has reported consecutive daily records of coronavirus cases.
One of the companies involved is Taiyo, a Japanese manufacturer of multilayer ceramic capacitors, components used in electronic applications, from smartphones to cars.
Ralec, a supplier of electrical components known as resistors, has forecast a 30% drop in production capacity for July, according to its Taiwanese parent company Kaimei Electronics.
Although most of Malaysia’s main peninsula is strictly locked down, a large number of semiconductor-related companies have been granted exemptions allowing them to operate at 60% of their workforce.
Passive component makers Epson, NDK and Yageo all received the approval, as did Advanced Semiconductor Engineering, the world’s largest chip testing and packaging company, analysts said.
“This [approval] happened much faster than at the end of March last year, ”said Forrest Chen, analyst at Trendforce, a Taiwan-based electronics research group.
“Taiyo is able to maintain 80-85% capacity utilization below 60% operating rate,” Chen added. Orders were also being redirected to other Japanese capacitor manufacturers such as Murata and Kyocera and TDK for automotive components.
But even highly automated parts of the semiconductor industry could experience delays of several weeks in shipping schedules due to blockages, Chen said.
The region is also an important hub for essential elements of the production processes of technology companies, such as testing and packaging. The foreclosure restrictions were of concern because of the labor-intensive nature of these services, according to Mark Li, an analyst at Bernstein.
Factories in Thailand and the Philippines, which are also experiencing large-scale epidemics and strict restrictions, also provide these services, he said.
In Vietnam, one of the world’s largest electronics exporters, authorities reported a record daily rise in Covid infections over the weekend, most of which were in Ho Chi Minh City, the largest urban center. from the country. The provinces around the capital Hanoi, which house electronic facilities, were also affected.
Samsung was forced to cut production at one of its large consumer electronics factories in Ho Chi Minh City last week after an outbreak sparked demands for the Vietnamese government to find homes for thousands workers of the industrial complex.
According to a person familiar with the matter, the South Korean tech group, which is one of Vietnam’s largest employers, has negotiated with the government on the issue.
But the world’s largest producer of memory chips, smartphones and electronic displays do not yet expect a severe financial impact from the disruption. Samsung’s other Vietnamese factories that manufacture and assemble its smartphones have remained in line.
Additional reporting by Edward White and Song Jung-a in Seoul
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