Lockdowns in Suzhou in China’s Jiangsu province are expected to have a negative impact on the chip supply from the coastal city’s industrial park and fuel the global chip shortage.
By the end of Tuesday, a total of 31 Covid-19 cases had been identified in Suzhou, resulting in the suspension of two semiconductor firms’ production lines in the city.
The city’s government said it would try to cut off virus transmissions as it could affect the ongoing Winter Olympic Games and the coming “two sessions” – the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference, in Beijing.
Some electronic product makers said that despite the hiccups in chip supplies from Suzhou, they could still maintain normal operations by using their inventories. However, analysts said if the epidemic situation in Suzhou continued for a longer time, some downstream manufacturers would fail to meet their production targets for the first quarter.
Since the global rise of the highly-infectious Omicron variant in late 2021, China has reported virus outbreaks in several of its major cities, including Xi’an, Tianjin, Shenzhen and Zhengzhou.
On Tuesday, a total of 102 cases were identified in the country, which has adopted a “dynamic zero local infections” strategy. Of them, 46 cases were local infections, including 18 in Suzhou.
On Sunday, four Omicron cases were identified in Suzhou. The city’s government immediately suspended classes at schools and kindergartens and shut down entertainment facilities such as bars, cinemas and karaoke parlors.
It also required people who live in areas where infections had been discovered to do Covid tests.
From Sunday evening, a number of hospitals in Suzhou halted outpatient and emergency medical services. Neighboring Shanghai also announced a halt to its inter-province metro operation to and from Suzhou’s Kunshan.
On Tuesday, major highways in Suzhou were shut down while temperature measurements and health code checking were implemented on public transport.
After more infections were identified on Monday and Tuesday, several residential buildings in Suzhou were locked down, including two dormitories in the Suzhou Industrial Park.
Established in 1994 and jointly governed by Chinese and Singaporean officials, the park is now home to 1,837 high-tech firms. A partial lockdown of the park has so far caused the suspension of production lines at the Hejian Technology Corp and Jinglong Technology, the mainland units of two Taiwanese semiconductor firms.
According to the Chinese media, Hejian Technology, a subsidiary of Taiwan’s United Microelectronics Corp, is China’s second-largest semiconductor foundry company after the Shanghai-based Semiconductor Manufacturing International Corporation (SMIC).
Hejian’s chips, ranging from 0.5 microns to 110 nanometers, are mainly used in end products such as vehicles, LCD drivers, microcontrollers (MCU), power management, fingerprint identification machines and smart cards.
Jinglong Technology, a subsidiary of Taiwan’s King Yuan Electronics Co, provides chip-packaging and test services to chip makers, according to its website. King Yuan Electronics said it was told by local authorities in Suzhou that Jinglong could resume production once the epidemic situation was stabilized.
It said it remained optimistic that it would meet its production target for the first quarter.
Sino Wealth Electronic Ltd, a Chinese integrated circuit (IC) design firm, told the media that its production would be seriously affected if the suspension of the production lines of Hejian Technology, its major supplier, was extended.
The company said it also used the services of Jinglong, but the impact of its suspension was small.
Some other downstream manufacturers were affected by the shutdown of Hejian’s and Jinglong’s facilities. Taiwan’s Novatek Microelectronics, which produces LCD drivers, said its Suzhou unit would strictly follow the local government’s anti-epidemic requirements, which would not have a significant impact on its operations.
MCU makers Holtek Semiconductor and Sonix Technology said they could maintain normal operations by using their chip inventories, but they would closely monitor the chip supply situation in Suzhou.
Liu Pei-chen, a researcher at the Taiwan Institute of Economic Research, said although the shutdown of Hejian’s and Jinglong’s facilities might not have a big impact on the global chip supply for the moment, more and more downstream manufacturers would be affected if the lockdowns in Suzhou were extended.
Liu said these firms would then have to order chips from Taiwan-based fabs.
Read: Academic report unveils China’s high-tech bottlenecks
Follow Jeff Pao on Twitter at @jeffpao3