Chip makers are surviving the coronavirus better than others
Automation and squeaky clean environment have given an edge to chip businesses operating in Wuhan, China
Every morning hundreds of professionals in Wuhan, epicenter of the coronavirus outbreak, don protective masks and hazmat-style suits before they enter their workplace.
They are not hospital workers treating patients infected with the virus that has killed more than 1,300 people in China so far. Rather, they work for Wuhan Xinxin Semiconductor Manufacturing Co. (XMC) and Yangtze Memory Technologies Co. (YMTC), which operate hospital-style clean rooms designed to prevent microscopic particles from contaminating silicon wafers.
The fallout from the deadly coronavirus outbreak for the tech industry and the global supply chain has been significant, with Canalys forecasting that China’s smartphone shipments would drop 40 to 50 percent in the first quarter of 2020.
Yet the semiconductor manufacturing sector has been more resilient to the impact thanks to its higher level of automation and clean room environment on the factory floor.
Jim Handy, semiconductor analyst from Objective Analysis in California, said the “incredibly clean and uncrowded” workplace in chip fabs would probably limit the spread of any disease. Workers often live in dormitories on the company’s campus, so they do not need to take public transport to work, he added.
That view was echoed by Linda Sui, director of Wireless Smartphone Strategies at Strategy Analytics, who said labor-intensive companies like Foxconn have seen a much greater impact because workers returning from their Spring Festival break have had to undergo 14-day quarantines before resuming work.
Foxconn, which makes most of the world’s iPhones, employs more than 1 million people in a dozen factories on the Chinese mainland, including a major facility in Zhengzhou, about 480km (300 miles) from the center of the outbreak.
China enforced mandatory factory shutdowns in at least 24 of its 31 provinces, municipalities and autonomous regions from January 31 to February 9 in an effort to contain the outbreak, but that order does not appear to have been directed at semiconductor factories which typically operate 24/7.
“There will not be a big impact on chip manufacturers,” Sui said. “The demand [for chips] will fluctuate for sure but in terms of production capacity, these factories work 24 hours a day, 365 days a year. Their machines keep running even during holidays.”
An XMC spokeswoman told the Post last week that its factory lines have not been interrupted due to the coronavirus and that production continued safely during the Spring Festival holidays.
China is a key part of the global electronics industry’s value chain, with semiconductors critical to the function of everyday consumer electronics, communications and computing products, as well as increasingly sophisticated applications such as 5G and artificial intelligence.
Wuhan, the capital city of Hubei province and epicenter of the outbreak, is known as the “Chicago of the East” for its industrial and transport industries.
Apart from being a major supply chain hub in central China, the city is an important player in the country’s semiconductor industry, with more than 100 chip design, manufacturing, packaging and testing companies in operation as of August, according to the Hubei government.
XMC and YMTC – both under the state backed Tsinghua Unigroup – specialize in designing and manufacturing memory chips. In statements issued earlier this month they indicated the coronavirus outbreak has had a minimal impact on operations so far.
YMTC did not respond to a request for updated information on Wednesday.
In a document issued to customers earlier this month, XMC said it has appropriately reduced its production capacity, adding that before the Spring Festival holiday it had stocked up on raw materials which will help it continue customer deliveries.
Founded in 2006 in Wuhan, the company focuses on NOR Flash memory and has been providing professional 300mm (12-inch) wafer foundry services since 2008.
However, chip makers are not completely immune from the disruptions. The shortage of manpower and raw materials, the evacuation of foreign engineers from Wuhan and transport restrictions are all challenges facing semiconductor companies in the city, according to Handy.
The suspension of US-China flights by major US airlines could seriously impact deliveries of finished chip products to US customers.
A YMTC spokesman said last week that the lockdown in Wuhan has created some challenges in the supply chain and labor supply, but that it is actively coordinating with raw material suppliers and logistics providers to ensure normal operation of the production line.
Shenzhen China Star Optoelectronics Technology Co said on its official WeChat account at the end of January that there were no cases in its Wuhan factory and that the company puts the health and safety of its employees first.
BOE Technology Group, which began mass production of leading-edge 10.5 generation LCD panels at a clean room facility in Wuhan in December, said that it will reduce its monthly output due to constraints in the materials supply chain.
“It is expected that production capacity growth will slow down, which may further exacerbate the ongoing global supply shortage of ultra-large-sized display screens in 2020,” the company said in a statement on Wednesday.
According to a statement issued by Hubei authorities on Thursday, enterprises in the province cannot resume work earlier than midnight on February 20, although those exempted from the rules include companies involved in epidemic prevention and control, public utilities, those providing daily necessities, such as supermarkets, and “other related enterprises” important for the national economy and people's livelihoods.