Southeast Asia’s Covid source puts the finishing touches on global chip supply


Southeast Asia’s crucial technology supply chain has been hit by record levels of Covid-19 infections, a development that could exacerbate a global shortage of chips.

Malaysia and Vietnam, economies that play a critical role in the production of electronics, as well as packaging and component testing that go everywhere, from vehicles to smartphones, are facing their biggest fires. when the pandemic started.

The situation threatens to squeeze even more out of the global technology industry, particularly for products that require semiconductors. The chip industry has been hit by the confluence of a global shortage and a growing demand that locks limit people to their homes.

Southeast Asia is a significant player in terms of its role in the manufacture of passive components, which include resistors and capacitors used in smartphones and other products, said Gokul Hariharan, co-head of technology research, media and telecommunications in Asia at JPMorgan. About 15% to 20% of global passive components are made in the region, according to the bank.

“He’s not reached a stage where he’s a showstopper but it’s something to monitor because he’s progressively getting worse,” Hariharan said.

More than 50 international chip vendors operate manufacturing facilities in Malaysia, which also hosts many semiconductor packaging and testing plants. The country recently imposed its fourth block since it reported consecutive daily registrations of coronavirus cases.

Health workers collected a sample of coronavirus swabs in Hanoi. Vietnam recently announced a record daily increase in infections © AFP via Getty Images

One affected company 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, predicted a 30 percent drop in production capacity by July, according to its Taiwanese parent Kaimei Electronics.

Although most of Malaysia’s mainland peninsula is subject to strict rigor, a large number of semiconductor-related companies have received exemptions that allow them to operate at 60 percent capacity.

Passive component manufacturers Epson, NDK and Yageo have all received such approval, as has Advanced Semiconductor Engineering, the largest chip testing and packaging company in the world, according to analysts.

“This one [approval] it happened much sooner than at the end of March last year, ”said Forrest Chen, an analyst at Trendforce, a Taiwan-based electronics research group.

“Taiyo is able to maintain an 80 to 85 percent capacity utilization below the 60 percent operation rate,” Chen added. Orders were also redirected to other Japanese capacitor manufacturers such as Murata and Kyocera and TDK for automotive components.


But even the highly automated parts of the semiconductor industry could suffer week-long delays in shipping plans due to blockages, Chen said.

The region is also an important hub for essential parts of technology companies ’production processes such as testing and packaging. Blockchain restrictions were concerned because of how labor-intensive such services are, according to Mark Li, analyst with Bernstein.

Factories in Thailand and the Philippines, which are also experiencing large-scale outbreaks and tight restrictions, are also performing these services, he said.

In Vietnam, one of the world’s largest electronics exporters, authorities reported a record daily increase in Covid infections over the weekend, most of which were in Ho Chi Minh City, the largest urban center. of the country. The provinces around the capital Hanoi, which host electronic structures, have also been hit.

Samsung was forced to cut production at one of its largest consumer electronics factories in Ho Chi Minh City last week after a fire sparked demands for the Vietnam government to find housing for thousands of workers in the complex industrial.

According to a person familiar with the matter, the South Korean technology 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 screens is not even expecting severe financial success from the disruption. Samsung’s other factories in Vietnam that manufacture and assemble their smartphones have remained online.

Additional reports from Edward White and Song Jung-a in Seoul

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