Outbreak of COVID-19 Impedes Taiwanese Tech ManufacturingEverstream Team
In early June, several major Taiwanese tech firms serving the automotive, electronics, medical device, and other industries were forced to halt or reduce production at their sites following a cluster of COVID-19 infections. In response to the outbreak, the Central Epidemic Command Center (CECC) ordered emergency measures to contain the spread of the virus. Within days, several companies, including King Yuan Electronics, Greatek Electronics, and Accton Technology, began requiring COVID-19 tests for thousands of employees. While production has gradually resumed, output remains curtailed due to the testing and quarantine measures. The long-term impact of the COVID-19 outbreak at the cluster of technology companies is expected to compound an already weakened global semiconductor market and worsen the shortages.
A COVID-19 cluster was first reported in the northwestern county of Miaoli on June 4 by King Yuan Electronics, with about 182 virus cases confirmed at its facility. The company announced a 48-hour suspension of operations as it sought to isolate the cases. On June 6, Taiwan’s Central Epidemic Command Center established a command post at the plant and ordered all its migrant workers to take two weeks of paid leave regardless of COVID-19 testing results. Migrant workers make up 30 percent of King Yuan Electronics’ workforce. The company was able to resume operations on June 8 with lower-than-normal output. According to the latest developments, Taiwanese government officials are now requiring a negative COVID-19 test before allowing the migrant workers to resume work. Disruption from the outbreak is expected to reduce the company’s production and revenue by 30-35 percent through June.
Following King Yuan Electronics’ announcement, semiconductor tester and packager, Greatek Electronics Inc., reported a COVID-19 outbreak at its site on June 6, with an initial 8 confirmed infections among its workforce. The company is currently testing all 4,264 of its employees, including 1,000 migrant workers. Taiwanese government officials have not ordered the company to send migrant workers home, and the company has not halted production. Output at the site is expected to drop by 10 percent due to the required testing of all employees and prevention measures implemented at the site.
Mass testing of more than 1,740 employees is also underway at networking equipment manufacturer Accton Technology in Chunan, where a cluster of COVID-19 infections was discovered on June 7. The company reported 13 infections at its plant, but operations are expected to continue as normal until testing ends on June 10. Accton Technology has extended the delivery lead times for its switch products to more than 50 weeks due to the shortage of critical components.
Following the initial outbreaks at the three sites mentioned above, several other technology manufacturers in Miaoli County reported virus outbreaks among employees. Conductive silver pastes and laser equipment maker TeraSolar Energy Materials Corporation (TSEMC) subsequently shut down its plant through June 15 to conduct mass testing of its employees. Powerchip Semiconductor Manufacturing Corporation also reported a COVID-19 outbreak, but the company has not reported any impact on operations to date. It is likely that the company will carry out mass testing of its employees which has the potential to reduce production output. Six workers at Foxconn subsidiary Foxsemicon Integrated Technology, which supplies semiconductor equipment and components, also tested positive for COVID-19. The Miaoli plant has suspended operations and the company has begun mass testing of its workforce. The company remained closed until June 9 to conduct the tests.
|Company Name||Location||Mass testing||Shutdown|
|King Yuan Electronics||Miaoli County||Yes||Jun 6 – 8|
|Foxsemicon||Miaoli County||Yes||Jun 8 – 9|
|Greatek Electronics Inc.||Miaoli County||Yes||No|
|Accton Technology||Changhua County||Yes||No|
|TeraSolar Energy Materials Corporation||Zhunan||Yes||Jun 7 – 15|
Production disruptions in Taiwan can have a severe impact on the global supply of semiconductors as the country accounts for a fifth of the world’s chip manufacturing capacity. More stringent COVID-19 testing and vaccinations will be implemented in manufacturing facilities across the country. These requirements will likely cause production delays as manufacturers reduce their workforce and limit social interactions. Mass testing will be conducted on a weekly basis at several companies. Production disruptions have the potential to affect the supply of semiconductors and other technology products used in the automotive, electronics, medical device, and other industries.
Companies that rely on migrant workforces could be at greater risk for production disruptions. Migrant workers face a higher chance of COVID-19 transmission due to shared housing conditions; however, they have been confined to shared living spaces to curb transmission. Local authorities in Miaoli issued a controversial ordinance that confined migrant workers to their dormitories and limited them to only going to and from work. ASE, a semiconductor manufacturer in the Taoyuan district of Chungli, issued a similar restriction for its workers despite not reporting any COVID-19 infections. Movement restrictions and crowded dormitories impede migrant workers’ ability to properly practice social distancing and increase the chance that COVID-19 cases will spread rapidly in companies.
Despite these risks, COVID-19 cases have declined since the outbreak was first reported and no new companies have reported outbreaks. The Central Epidemic Command Center reported on June 13 only four positive tests out of 5,000 workers. The Taiwanese government announced priority vaccination for the 293,000 hi-tech workers in more than 900 companies in the country’s three major industrial parks: Hsinchu Science Park in northern Taiwan, the Central Taiwan Science Park in Taichung, and Southern Taiwan Science Park in Tainan. The vaccinations are expected to begin by late June and Taiwan expects an additional 10 million doses of the vaccine by August.
Rising cases in Malaysia could also pose a risk to global supply. The Malaysian government has exempted semiconductor manufacturers from pandemic control measures; however, outbreaks at Infineon Technologies AG and Taiyo Yuden among others are expected to reduce semiconductor output by between 15 and 40 percent. Malaysia has a large presence in the passive component market for semiconductors. Even if chips can be manufactured elsewhere, production disruptions in Malaysia could delay the final delivery of semiconductors.
On a positive note for semiconductor supply in the automotive sector, Japanese chipmaker Renesas Electronics expects a return to full production capacity around mid-Jun, which will help the global market recover. The company restarted its Naka factory on April 17 following a devastating fire on March 19 that forced the company to shut down. For the automotive customers in Europe, Robert Bosch has recently opened a EUR 1 billion (USD 1.2 billion) semiconductor manufacturing plant in Dresden, Germany, which is forecasted to help resolve the ongoing chip shortage that is driving global production stoppages at major automakers.
The COVID-19 pandemic has once again highlighted the unpredictability of supply chain risk. Customers in affected markets that rely on semiconductor supplies for their end products should have end-to-end visibility to help them identify disruptions and developments in real time, conduct risk assessments, and monitor suppliers. Mapping the supplier network beyond Tier 1 can help mitigate risks throughout the supply chain by identifying potential supply shortages in a timely manner, i.e., allowing companies to secure additional supplies from unaffected suppliers more quickly.
Tech manufacturers are encouraged to take steps to coordinate with their suppliers to ensure they have business continuity plans in place should a new COVID-19 outbreak occur. Companies are also advised to monitor their inventory levels and plan for additional inventory if critical sourcing locations are impacted by unforeseen disruption such as COVID-19 outbreak. Organizations should consider planning inventory in diverse locations to mitigate the risk of delayed shipments of critical materials. Everstream Analytics will continue to monitor the situation and provide its users with near real-time updates.
Miaoli electronic factory positive rate dropped significantly Chen Shizhong: Ming expansion inspection 6 factory more than a thousand migrant workers fear confirmed more – life – Free Times electronic newspaper (ltn.com.tw)