Outbreak of Covid-19 at Taiwan Factory Might Make Chip Shortage Matters Worse

The global reliance on Taiwan for semiconductors highlight the danger of putting all the world's chips in one basket.
Jennifer ChanJun 07,2021,16:03

The world relies on Taiwan for so many of the semiconductor chips that power so many of our devices. In 2020, the spread of the pandemic caused a manufacturing slowdown in RAM chips, leading to a global shortage that affected a wide range of industries, particularly, the automobile sector. Fewer chips were being made while at the same time an explosion of remote workers due to stay-at-home measures gave birth to a massive increase in consumer electronics sales which only served to worsen the chip shortage.

Now, as Taiwan, the island on which the world relies for chips, gets back into the business of manufacturing these tiny but critical components. a cluster of Covid-19 infections at a factor in the central part of the country caused a temporary operation halt in one of the world's largest chip-testing factories.

According to Taiwan’s Centers for Disease Control, 182 confirmed cases were reported as of June 5, prompting King Yuan Electronics Co. (2449.TW) to shut down its main plants in Miaoli County over the weekend.

All of the factory's 2,000 foreign workers (abo0ut 30% of its workforce) were forced into a 14-day quarantine the company turned to temporary local workers to fill the spots.

Aaron Chang, acting spokesperson of the company said this after the company reopened production Monday:

“Once migrant workers return to production lines in two weeks, the company will speed up production to make up for its loss. The company sees no major impact on annual finances and businesses.” On the news, the stock inched up over 1%.

However, the global chip shortage is far from over as a recent rise in Taiwan, an inital national success story in stomping out the Covid-19 pandemic, is causing more production problems.

King Yuan Electronics said in a statement to the local stock exchange that production capacity and revenue are expected to drop by 30% to 35% in June.

More than 11,000 local cases and 260 deaths have been reported by Taiwan health authorities, the majority of which have been reported in the last five weeks. Multiple measures have been taken to stop the spread; the United States just announced it would send 750,000 vaccine doses to the island to help thwart the recent rise in cases.

The good news for the chip industry, however, is that, while manufacturing data indicate Taiwan’s technology exporters have not been seriously affected, supply Chain issues are still a problem. One of the many things the Covid-19 pandemic has brought to light is that the global reliance on Taiwan for the semiconductors that power the world show the dangers of putting all your chips in one basket.

Topics:chips, semiconductors, covid-19