COVID-19: Watch for electronic component shortages

By Fendy Wang, ESM China

Editor’s note: Our colleagues in China, Taiwan, and other regions in Southeast Asia continue to report from the ground on the coronavirus’s impact on the electronics industry. ESM China shared the following update.

At least 30 countries around the world have declared a state of emergency, according to sister publication ESM China, as COVID-19 continues to spread. In addition to the urgent “cities closure” in European and American countries, major manufacturing industries in the Philippines, Malaysia, and other Southeast Asian countries have announced closures in succession, which will bring challenges to the supply side of electronic components.

Philippines: MLCC capacity
The Philippines announced on March 12 that the capital, Manila, will be “capped” (community segregation) for 30 days starting March 15. All sea, land, and air transportation to and from Manila has been suspended. Manila has three of the eight major airports in the Philippines.

MLCC capacity will be hit hard. The Philippines are an important manufacturing base for Japanese and Korean manufacturers. Murata, Samsung Electronics, and Taiyo Yuden have factories in the Philippines. Murata and Samsung Electronics have 15% and 40%, respectively, of their MLCC production capacity in the Philippines. In addition, the volcanic eruption in the Philippines in January has restricted air transportation, and the industry subsequently has concerns over the supply of MLCCs.

According to ESM China, Murata and Samsung’s MLCCs are mainly used in high-end markets such as smartphones, automobiles, industrial, and medical equipment. The suspension of production from Murata and Samsung will have an impact on the high-end MLCC market.

Murata has a global monthly MLCC production capacity of about 150 billion units. Except for Japan and the Philippines (15%), factories are located in Wuxi, China (40%), Thailand, and Singapore. Samsung’s MLCC global monthly production capacity is about 100 billion units, except for the Philippines. Apart from [that] 40%, factories are distributed in Busan (20%) in South Korea and Tianjin (40%) in China.

However, the high-end expansion capacity of Japanese, Taiwanese, and mainland MLCC manufacturers will be opened through 2020, as well as factories that are located in mainland China. This can alleviate the shortage crisis to a certain extent. Yageo’s MLCC production capacity is very small in Suzhou (70%) in China, Taiwan, and Southeast Asia.

Malaysia: Resistors stop production for 14 days
Malaysia announced on March 17 that it will close the country for 14 days, including transportation and public facilities, domestic enterprises, and factories. According to ESM China, Japanese and Taiwanese companies manufacture resistors in Malaysia. Huaxin Technology and Wang Quan (a subsidiary of Qilixin) have a large percentage of their production capacity in Malaysia. In addition to resistors, Japan’s Murata produces inductors and MLCCs; Nichicon and Nippon Chemicon manufacture aluminum electrolytic capacitors; and Panasonic produces solid-state capacitors in Malaysia.

Wang Quan mainly produces conventional resistors in Malaysia, and its production capacity accounts for about 50% of its total production. Its Kunshan and Hunan factories have recovered their production rates, which can alleviate the shortage problem. Huaxin Technology’s plant in Malaysia mainly produces automotive resistors. The shutdown is expected to have a greater impact.

In terms of inductors, Japan’s Murata and Chiru have factories in Malaysia. Due to the large number of participants in the global inductor market, the competitive landscape is relatively fragmented and the demand is weak. Extreme price fluctuations are not expected.

In aluminum electrolytic capacitors, Nichicon has led all models of pin-type and screw-type aluminum electrolytic capacitors since 2018. Aluminum electrolytic capacitors are mainly used in industrial, automotive, home appliances, lighting, consumer electronics, and other fields. Historically, the price increase has been far less than that of capacitor resistors. It is expected that the increase will be limited.

Malaysia is a back-end semiconductor manufacturing center in Southeast Asia, and companies such as Intel, Infineon, ASE, and ST have set up factories in the country. In 2018, three Chinese semiconductor manufacturers, Suzhou Gujing, Tongfu Microelectronics, and Huatian Technology announced their acquisition of a packaging and testing plant in Malaysia.

In 2010, the Malaysian government introduced a series of diversified foreign investment encouragement policies since its economic transformation plan. Manufacturers such as ASE, Infineon, and ST have focused on high-margin areas such as automobiles and industry. Intel’s processor (CPU) has local capacity in Malaysia (accounting for about 50% of the total CPU rear-end capacity), which may exacerbate a CPU shortage. ESM China reports that server ODM manufacturers currently have roughly two to three weeks of inventory.

Vietnam and India: Smartphone supply and demand
On March 24, India announced that it was closing. India is both a manufacturer and consumer of smartphone-related products. With the entry of Foxconn and Wistron, part of the production capacity of iPhones and iPads is completed in India.

China’s major mobile phone brands such as Huawei, Xiaomi, OV, and South Korea’s Samsung have set up factories or sales centers in India. India’s closure will affect the supply of electronic products.

According to the “Indian Smartphone Report 2018” released by IDC, China’s Xiaomi accounted for 28.9% of the entire Indian smartphone market. In addition, Chinese brands accounted for four of the top five mobile phone sales in India. The impact of the epidemic in the Indian market will have a greater impact on demand rather than supply, according to ESM China.

The Vietnamese government’s various investment promotion policies have stimulated the entry of many large electronics manufacturing companies, including many Taiwanese EMS factories such as Foxconn, Compal, and Lite-On Technology. Intel’s IC packaging and testing has been stationed in Vietnam. Lixun Precision, GoerTek, and Lansi Technology have either acquired or established factories in Vietnam, which has not yet closed its cities.

The similarities between Vietnamese and Indian manufacturing markets are that they focus on the smartphone industry supply chain. India focuses on the assembly and production of mobile phone terminal products, while Vietnam focuses on the manufacturing of key components. If both of these Southeast Asian countries close down, global smartphone production capacity will be hit hard, and the 5G mobile phone popularization process will be slowed down, ESM China reported.

In addition, Thailand, Singapore, Indonesia, and other countries are also major places in the electronics industry. The current spread of the epidemic is unpredictable, and the follow-up impact remains to be seen.

The sudden epidemic disrupted the rhythm of the global electronics supply chain. Southeast Asian countries are second to China in the global electronics manufacturing industry. Once affected by the global industry chain, they may face paralysis. However, under the premise that both the demand side and the supply side are stagnant, the magnitude of the shortage will be buffered.

This translated article originally appeared at sister publication EPS News.