Global semiconductor shortages to worsen as COVID ravages Malaysia

Semiconductor shortage Malaysia
Semiconductor and computer chip supply chain shortage due to Coronavirus COVID-19 pandemic. Image by eamesBot | Bigstockphoto

While eyes have been on Taiwan amidst the recent shortages in car chips, automakers must brace for extended capacity tightness as Malaysia faces coronavirus cases surging to record highs.

Cases surged past the 20,000-mark earlier this month and have maintained record-high levels since then. Considering its population, Malaysia’s daily reported cases are now some of the highest globally.

In response, the Malaysian government implemented lockdowns anew. To soften the blow on the economy, authorities allowed a few manufacturers to operate at 60% and permit them to increase this to 100% once their workforce is fully vaccinated.

Malaysia as a chip hub

Following the lead of Taiwan, South Korea, and Japan, Malaysia has quickly emerged in recent years as a leader in chip testing and packaging.

It is now the world’s seventh-largest semiconductor exporter and is home to plants operated by key suppliers Intel, Infineon Technologies AG, NXP Semiconductors NV, and STMicroelectronics NC.

However, surging COVID-19 cases in the country may force firms to move production lines to China to meet rising demand. Last week, Ford Motor Co. temporarily suspended production of its popular F-150 pickup truck at one of its US plants, citing a semiconductor-related part shortage in Malaysia as the cause.

An anonymous source told the Global Times that lead time for chip supplies has already extended to as long as 20 weeks, costing firms skyrocketing prices.

When will the shortages end?

In May, Glenn O’Donnell of Forrester estimated that the shortage might persist through 2022 and into 2023, given voracious demand for technology and severely limited capacity on the side of chip fabs or semiconductor manufacturing facilities.

Patrick Penfield, professor of supply chain practice at Syracuse University, says that the global supply chain has not seen anything of this magnitude before.

However, a bright spot may be ahead. Last month, the South China Morning Post reported that China’s chip output reached 203.6 billion units from January to July of 2021, up 47.3% compared to the same period last year.

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