Shortages of semiconductors and other components have hammered automakers for months. This is based on a recent Bloomberg report. Malaysia is a major centre for chip testing and packaging, with Infineon Technologies AG, NXP Semiconductors NV and STMicroelectronics NV among the key suppliers operating plants.
With Covid-19 infections soaring, plans to lift lockdowns and restore full production capacity are in jeopardy. The seven-day average for reported daily infections has past 20,000, up from just over 5,000 in late June.
Ford Motor Co said that it would temporarily suspend production of its popular F-150 pickup truck at one US plant because of “a semiconductor-related part shortage, as a result of the Covid-19 pandemic in Malaysia.”
Malaysian authorities are racing to address the outbreak and has granted exemptions to certain manufacturers in an effort to keep the economy on track. Companies were allowed to keep operating with 60% of their workforces during June lockdowns and they’ll be able to move back to 100%, when more than 80% of their workers are fully vaccinated. On Aug 23, the number of reported infections dropped to 17,672.
The situation is volatile. Factories have to shut down completely for two weeks for sanitation, if more than three workers contract Covid-19.
The situation could aggravate semiconductor shortages, already at crisis levels. Chip lead times, the gap between ordering a semiconductor and taking delivery, increased by more than eight days to 20.2 weeks in July from the previous month, according to research by Susquehanna Financial Group. That gap was already the longest wait time since the firm began tracking the data in 2017.
Automakers have lost sales after a series of unexpected blows in the past year, including a cold snap in Texas that hobbled factories there and a fire in Japan at a critical auto chip plant. Toyota Motor Corp said recently that it would suspend production at 14 plants because suppliers, particularly in Southeast Asia, have been hit by new Covid infections and lockdowns. It has partners clustered in Thailand, Vietnam and Malaysia. Thailand and Vietnam saw sharp increases in infections.
Malaysia’s position as a prime base for testing and packaging chips is critical because those are the last steps of semiconductor production. Electronics and electrical products account for 39% of the country’s total exports, according to data from the Ministry of International Trade and Industry.
Vaccinations are critical to ensuring the country can play its part in the technology supply chain, he said. About 57% of the total population has received at least one dose, according to the health ministry.
In recent weeks, Nissan Motor Co and General Motors Co both warned the component shortage is exacerbating due to the lockdowns in Malaysia, with the Japanese carmaker shutting the production lines at its Smyrna, Tennessee, facility for two weeks in August.
Before the disruptions in Malaysia and other parts of Southeast Asia, it was already forecast that the chip shortage will cost car firms more than US$100 billion in lost production in 2021 alone. The extent of the damage may ultimately be determined by how effective governments like Malaysia’s are able fight against further outbreaks.
IHS analysts Mark Fulthorpe and Phil Amsrud said that packaging and testing operations are particularly vulnerable to the virus, because they need more people than chip manufacturing, a largely automated process.
If the Government is serious about recovery, then MITI has to work closely with chip manufacturers on what’s required – vaccination of workers, logistics for delivery and also accommodating other requirements of manufacturers including those in the supply or distribution chain. Can they do that?
Reference:
Chip shortage set to worsen as Covid rampages through Malaysia, Debby Wu, Yoolim Lee, Yantoultra Ngui & Ravil Shirodkar, Bloomberg, TheEdge CEO Morning Brief, 25/8/21
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