The spread of the Covid-19 outbreak in Taiwan to the country’s chip factories threatens to delay semiconductor shipments, some companies and analysts have indicated to the FT, which could significantly aggravate the current global chip shortage situation. , which grips multiple industries such as automotive and consumer electronics.
King Yuan Electronics (KYEC) has confirmed that 238 employees out of a total of 7,300 have been infected by the coronavirus, most of them foreign workers. The company assured that it expects that this situation will lead them to reduce their production capacity and income in June by between 30% and 35%, according to the aforementioned newspaper.
The same outbreak would have infected workers at the Greatek chip packer, telecommunications equipment maker Accton and Foxsemicon, a semiconductor maker affiliated with Apple supplier Foxconn.
Over the past weekend KYEC closed its major plants in Miaoli County for the weekend. The Taiwanese government put the company’s 2,000 foreign workers under 14-day quarantine and the company has turned to temporary local workers to get its production lines back up and running. The firm has resumed operations, but with lower than normal production volumes, according to Bloomberg.
“Once the migrant workers return to the production lines in two weeks, the company will accelerate production to make up for the loss,” said a company spokesman.
The Taiwan outbreak highlights the threat posed by the global technology supply chain’s reliance on a small number of key players. Taiwan’s chip manufacturing industry is a crucial supplier and potential choke point for companies in a wide range of sectors, from consumer electronics to server farms to the automotive industry.
Taiwan reported 214 new cases of Covid-19 on Tuesday. The country has registered more than 11,0000 glasses and 260 deaths since the start of the pandemic. In addition to KYEC, Foxsemicon has also closed a factory for two days for disinfection and all companies are testing their entire workforce to tackle the problem.
Olaf Schatteman, a supply chain expert at consultancy Bain, told the FT that “the supply market is already under enormous pressure. We already have a four-month lead time from order to delivery of the chips from Taiwan, so any further reduction in supply capacity is going to exacerbate the shortage as is. “
King Yuan is one of the largest chip packaging and testing companies in the world. It works for giants in this industry such as MediaTek, which sells semiconductors for smartphones and televisions, among other devices, or for TSMC, the world’s largest supplier of semiconductors, with a 56% share of the chip manufacturing market. This company in turn works for companies like Apple and Qualcomm, who design their own chips. KYEC shares fell about 5% last week after the outbreak was reported.
“My guess is that it will primarily affect smaller chip design companies as large customers will be prioritized,” said Bernstein chip analyst Mark Li, adding that MediaTek had reiterated its revenue target for the second quarter despite problems at KYEC.
The risk of this outbreak disrupting production in the rest of the chip supply chain is considered much lower because those stages are much less labor intensive, allowing companies like MediaTek and TSMC to run their business with social distancing. . But analysts said it was unclear whether the measures Taiwan’s health authorities are taking to combat the outbreak were enough to stop the spread in electronics factories.
Last February, the Taiwanese health minister faced China over vaccines for Covid-19, as reported then by Bloomberg. He criticized that the Chinese government had lobbied politically to prevent them from purchasing 5 million doses of Pfizer vaccines directly from Germany to do so through a Chinese company. A fact that, according to some voices, could have triggered the current situation, since in May only 1% of the population of Taiwan was vaccinated, which increases the risk of a health crisis and that it may impact the chip industry, given Taiwan’s dominant position in this business, which has led the United States and China to explore ways to boost their own domestic production.