,Malaysia’s position as a prime base for testing and packaging chips is critical because those are the last steps of semiconductor production.
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KUALA LUMPUR: The number of Covid-19 infections is surging in Malaysia, threatening to aggravate shortages of semiconductors and other components that have hammered automakers for months.
The country hasn’t historically had the kind of importance to technology supply chains that Taiwan, South Korea or Japan do.
But in recent years, Malaysia emerged as a major centre for chip testing and packaging, with Infineon Technologies AG, NXP Semiconductors NV and STMicroelectronics NV among the key suppliers operating plants there.
Now Covid-19 infections are soaring in the country, jeopardising plans to lift lockdowns and restore full production capacity. The seven-day average for reported daily infections has pushed past 20,000, up from just over 5,000 in late June.STMicroelectronics
Ford Motor Co said last week 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.”
The country’s 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.
But the situation on the ground remains volatile. Factories have to shut down completely for as long as two weeks for sanitation if more than three workers contract Covid-19 under unofficial guidelines. The Delta variant is proving particularly infectious and difficult to stop.
“This could be very disruptive for Infineon and other companies that have plants of a few thousand workers,” said Samuel Tan, a semiconductor analyst with Kenanga Investment Bank Bhd.
Local firms are reporting such closures through exchange filings. STMicro and Infineon, both key auto suppliers, had to close facilities.
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.