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Global Supply Chain News: Virus Eruptions in Asia Adding more Havoc to already Stressed Global Supply Chains

 

Major Chinese Port Struggling with New Virus Outbreak, while Chip Factories also Affected

 

 

June 17, 2021
SCDigest Editorial Staff

You have probably seen the headlines in major business media, along the lines of “Why the Price of Everything is Going Up,” and “Shortages of almost Everything.”

Supply Chain Digest Says...

 

King Yuan Electronics, one of the island’s largest chip testing and packaging companies, has seen more than 200 employees tested positive for the virus in June.

 
 

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The answers to those questions involves a variety of intertwined factors, including surging consumer and business demand in a recovering global economy, labor shortages, and port and other logistics delays, and shortages starting upstream and affecting all the downstream supply chains.

That has set commodity, component and ocean shipping costs soaring, leading many to worry about an outbreak of supply chain inflation, a scenario not seen for many years. (See Supply Chain Inflation is Here).

Now a new factor: surging cases of COVID-19 in key Asian countries, after most escaped the level of cases seen in Western countries in 2020, just as the virus seems to be getting under control in the US and Europe.

The problem: still low rates of vaccination in those Asian countries, and in some cases ineffective vaccines even for those that do get the shot.

And all this is just adding more delays and shortages in the global supply chain.

Perhaps the most notable example: near closure of the giant port complex of Yantian, in the southern Chinese city of Shenzhen, a major export hub.

The Wall Street Journal reports that an outbreak among dockworkers has brought traffic at the port to a virtual standstill, adding to existing stress points in global shipping.

It is taking as long as two weeks for ships to be loaded at the port with goods for export, with about 160,000 containers waiting to be loaded at the moment.

Activity at the port, which handles more than 13 million containers a year (approximately 50% more than the port of Los Angeles), is now operating at just 30% of normal throughput. Experts say the delays could persist for several weeks.

Then of course the ships can experience similar delays waiting to be unloaded in Western ports.

Some large US importers are moving shipments to other Chinese ports – but that means rerouting ground shipments to the new export locations.

There is also more trouble in the semiconductor sector, where there has been a global shortage now for several months. It may be getting worse.

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The virus is breaking out in Taiwan, where about 20% of world’s semiconductors are made.

For example, as reported by the Wall Street Journal, King Yuan Electronics, one of the island’s largest chip testing and packaging companies, has seen more than 200 employees tested positive for the virus in June. Another 2,000 workers have been placed in quarantine - cutting shipments this month by about 30%.

There has also been a virus outbreak in Malaysia, where a number of semiconductor-related factories are located.

For example, German semiconductor manufacturer Infineon Technologies was ordered by health authorities in the country to shut down one of its two plants earlier this month due to COVI-19 cases.

A Malaysia factory operated by Taiyo Yuden, a Japanese maker of electronics and semiconductor parts, extended a holiday shutdown at by 10 extra days due to an infection breakout.

Rapidly growing exported Vietnam is also battling virus outbreaks.

“Right now the most important issue is to contain the outbreak at these specific companies and keep it from further spreading out,” Patrick Chen, head of Taiwan research for brokerage firm CLSA told the Journal. “If they cannot, then we will face a much more severe disruption.”


What are your thoughts on new COVID-19 outbreaks in Asia? Let us know your thoughts at the Feedback section below

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