Malaysia’s Coronavirus Situation Threatens To Exacerbate Chip Crisis

Malaysia’s Coronavirus Situation Threatens To Exacerbate Chip Crisis

The number of COVID-19 cases is on the rise in Malaysia, threatening to exacerbate shortages of semiconductors and other components that have plagued automakers for months. Important suppliers such as Infineon Technologies AG, NXP Semiconductors NV and STMicroelectronics NV operate in the country.

Historically, the Southeast Asian country has not had the kind of importance to supply chains that Taiwan, South Korea or Japan have. But in recent years, Malaysia emerged as a major chip packaging and testing center, and key vendors operating there include Infineon Technologies AG, NXP Semiconductors NV, and STMicroelectronics NV.

Now covid-19 infections are skyrocketing in the country, jeopardizing plans to lift the lockdowns and restore full production capacity. The seven-day average of daily new cases reported has exceeded 20,000, up from just over 5,000 at the end of June.

Ford said last week it would temporarily suspend production of its popular F-150 pickup at a US plant due to “a semiconductor-related parts shortage as a result of the covid-19 pandemic in Malaysia.”

The country’s authorities are moving swiftly to address the outbreak and have granted exemptions to certain manufacturers in an effort to keep the economy on track. Companies were allowed to continue operating with 60% of their workforce during the June closures and will be able to return to 100% when more than 80% of their workers are fully vaccinated. On August 23, the number of reported infections dropped to 17,672.

But the situation remains volatile. Factories have to shut down completely for two weeks if more than three employees contract the coronavirus, under unofficial guidelines. The delta variant is proving particularly infectious and difficult to stop.

The situation could exacerbate the semiconductor shortage, which is already at crisis levels. Chip lead times, the gap between ordering a semiconductor and receiving delivery, increased more than eight days in July to 20.2 weeks from the previous month , according to research by Susquehanna Financial Group. The June figure was already the longest wait time since the company began tracking the data in 2017.

Toyota said last week it would suspend production at 14 plants because suppliers , particularly in Southeast Asia, have been hit by new infections and lockdowns.

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