© Omdia Analysis | February 21, 2020
Semiconductor industry avoids direct impact of coronavirus
The semiconductor industry appears to have escaped the direct impact of the coronavirus crisis so far, but the market is likely to suffer the repercussions as the outbreak slows or suspends production among electronics manufacturers, according to Omdia.
Despite facing logistical, packaging and test challenges related to the coronavirus, semiconductor fabs located in China are continuing to function normally, with high capacity rates. However, the risks are considerable, given the semiconductor market represents a huge component of the global economy, generating an estimated USD 424.8 billion in revenue in 2019 alone, as reported by the Omdia Semiconductor Competitive Landscaping Tool. A potential disruption to Chinese chip production could have major ramifications for worldwide economic growth. “Global chip supply through the first two months of 2020 appears to be largely unaffected by the coronavirus outbreak,” said Len Jelinek, research vice president, components & devices, for Omdia. “There’s plenty of chip inventory in the channel, compensating for any coronavirus-related production shortfalls at semiconductor fabs located in the Wuhan area and elsewhere in China. Also, few semiconductor suppliers are located in areas affected by the virus, and all of the parts sold by these companies can easily be sourced from other chipmakers.” The real danger for the semiconductor industry lies elsewhere, as the coronavirus disrupts production at electronic manufacturing companies that represent some of the world’s largest semiconductor purchasers. “With electronic manufacturing services (EMS) and original design manufacturing (ODM) companies facing challenges regarding the number of workers returning from the Lunar New Year closings, the global market will face serious challenges as it enters the second quarter,” Jelinek said. “China is a major center for manufacturing services, with organizations including Foxconn basing massive factories in the country. These companies represent major purchasers of semiconductors, accounting for 29 percent of global purchasing this year.” Major EMS/ODM operations in the region include Foxconn’s iPhone production operations located about 300 miles from Wuhan in Zhengzhou. This plant is open and running—but only at about 10 to 20 percent of capacity due to workforce issues. Other EMS/ODM operations in the area, including those run by Jabil and Wistron, are also suffering workplace issues, but these don’t have the major impact on the semiconductor demand that Foxconn does. The capacity utilization rate for all electronics manufacturers in China presently is lower than normal. This is mainly due to labor shortages, with many workers still not returning to work. Furthermore, demand is seasonally weak, reducing stress on suppliers. Coronavirus slows import/export activity Although semiconductor supply appears to be intact, suppliers in China are encountering challenges related to the outbreak. “For foreign semiconductor companies, especially fabless firms, the greatest challenge is import and export logistics,” said Hui He, principal semiconductor analyst for Omdia. “Because of the controls placed on flights in and out of China, many government staff members haven’t returned to work. As a result, the import/export process in China now is taking much longer than before, slowing the pace of commerce.” However, the impact of this logistical slowdown is being mitigated by the fact that the first quarter is the slowest period of the year for the global electronics business. With production rates at relatively low levels, the negative impact of coronavirus has not been fully felt yet. Fabs cleanliness prevents disease spread Semiconductor fabs are inherently clean and highly automated, yielding an environment that’s not conducive to the spread of disease. As a result, foundries operating in the country—including SMIC, TSMC and UMC—have been able to maintain normal production conditions without any changes. Capacity utilization rates at these fabs remain high. In Wuhan itself, semiconductor supplier YMTC has kept its production line running at normal levels. The XMC fab in the Wuhan area is running smoothly as well. Package and test challenges For chipmakers, the impact is more serious in the package and testing realm. Due to labor shortages, many package and testing plants in China have reduced or even stopped operations. This has created a bottleneck for chip companies that rely on such back-end package and testing capacity. At present, many small and medium-sized chip design companies are faced with a dilemma of being unable to obtain sufficient production capacity from both fabs and package suppliers. If this production slowdown continues for an extended period, these design companies may face bankruptcy, or acquisition. Other coronavirus developments Most of the Chinese factories that are part of the supply chain for microelectromechanical systems (MEMS) and sensors declared that the operations would restart on February 10. Sensor suppliers indicate that they have enough stock to cover for the suspension of production during the extended Lunar New Year holiday, which halted production until February 10.
Royal Flex Circuits boosts effort to support healthcare Santa Fe Springs, California-based Royal Flex Circuits is ramping up capacity at its year-old manufacturing facility to be produce more of the printed circuits needed in the production of ventilators used specifically in the treatment of Coronavirus.
Lam Research reacts to COVID-19 situation Fremont, California-based Lam Research Corporation has issued a business update for its quarter ending March 31, 2020.
Panasonic,Tesla scaling down production in Nevada In response to Panasonic’s announcement this week of a temporary, full suspension of production of its operations at Tesla’s Gigafactory in Nevada, Tesla also issued a statement that it would significantly decrease production at the site.
NOTE temporarily suspends production at Windsor plant Swedish EMS provider NOTE has, in line with the UK authorities' decision to limit all non-essential travel and work, temporarily halted its production at its manufacturing facility in Windsor.
Texas Instruments adjusting operations in Texas Texas Instruments is following a Dallas County shelter-in-place order and reducing operations at the company’s Dallas-area plants.
European EV battery production gets a boost from the EIB The European Investment Bank (EIB) has signed a EUR 480 million loan agreement with LG Chem Wroclaw Energy, the Polish subsidiary of the LG Chem Group that was established to develop the group’s battery production facility in Europe.
Würth Elektronik CBT produces PCBs for ventilators The worldwide spread of the coronavirus is not only increasing the demand for personal protective equipment, but also for medical ventilators.
North American PCB industry sales down 1.1% in February Total North American PCB shipments in February 2020 were down 1.1% compared to the same month last year.
U.S. may further crimp Huawei's global chip supply Senior Trump administration officials have reportedly agreed on new restrictions to curb the global supply of chips to China’s Huawei Technologies, sources are saying.
Tesla to reopen NY plant to make ventilators Tesla has joined industry efforts to shift production from autos and other non-healthcare related components to much needed supplies that support the domestic battle against rising numbers of coronavirus victims and the need for testing.
Bosch develops rapid test for COVID-19 Developed in just six weeks, Bosch says the rapid test can detect a COVID-19 infection in patients in under two and a half hours – measured from the time the sample is taken to the time the result arrives.
Lockdown in India halts production at Foxconn and Wistron Both EMS giants are complying with the nationwide lockdown ordered by Prime minister Narendra Modi. Both Foxconn and Wistron have now suspended production at their plants in India.
NAND Flash ASP may tumble in 2H20 ahead of expectations The continued spread of the COVID-19 pandemic has resulted in considerably weakened shipment for most end products in 1Q20, according to the DRAMeXchange research division of TrendForce,
Beijer Electronics takes preventive measures – downsizes workforce Beijer Group says it has increased its readiness and is taking measures to address the currently assessed consequences of the spread of COVID-19.
COVID-19 forces Lacroix to close several plants The French EMS provider says it is taking appropriate steps to limit the spread of COVID-19, safeguard its teams and, as far as possible, ensure business continuity for its customers.
PVA joins growing list of companies helping fight COVID-19 Upstate New York-based PVA has ramped up efforts to supply solutions for the shortage of COVID-19 test kits, portable respirators, and mechanical ventilators.
Applied Materials walks back Q2FY20 business outlook Applied Materials Inc. is withdrawing its business outlook for the second quarter of fiscal 2020, ending on April 26, 2020, due to the changing worldwide response to COVID-19 and its impact on the company’s supply chain and manufacturing operations.
Getting creative: Ford, 3M, GE, UAW unite to battle COVID Ford Motor Company, 3M and GE Healthcare are brainstorming ways to engineer and manufacture medical equipment and supplies for front line healthcare workers and responders, as well as patients fighting coronavirus.
Hamamatsu Photonics establishes subsidiary in Korea Hamamatsu Photonics Korea Co., Ltd. has been established as a subsidiary to strengthen the sales structure for its Imaging and Measurement Instruments business in South Korea.
Serial production & prototype construction continues at Akasol Akasol says it will maintain its serial production as well as prototype and sample construction for the time being, despite the current crisis related to COVID-19; but with stricter precautions related to health and safety.
Bittium receives purchase order from the Finnish Defence Forces Bittium has received a purchase order from the Finnish Defence Forces for the Bittium Tactical Wireless IP Network (TAC WIN) system's products, which are meant for tactical communications.
Italian restrictions creates uncertainties for GPV’s Swiss factory As of the March 23, GPV’s production site in Mendrisio is unable to operate due to further restrictions imposed by the Italian government as well as from the government of the canton Ticino in Switzerland in an attempt to combat the spread of COVID-19.
Incap temporarily reduces capacity in the UK Following new strict guidelines announced by the British government on Monday 24 March to contain the COVID-19 pandemic in the UK, Incap will temporarily reduce the operations of its Straffordshire factory in the UK to focus on production of medical and scientific instruments only.
II-VI ups capacity for diagnostic testing systems II-VI Incorporated, a provider of lasers, optics, thermoelectrics, and subassemblies for the life sciences market, is ramping up manufacturing capacity of components and subassemblies for molecular diagnostic testing systems for polymerase chain reaction (PCR) testing platforms.Load more news