Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Chip industry set to take brunt of coronavirus
A Samsung Electronics' Digital Plaza store in Seocho-gu, southern Seoul, has a temporarily closed sign in the window, Feb. 22, following confirmation that a coronavirus-infected person had visited it. / Yonhap
By Baek Byung-yeul
By Baek Byung-yeul
The semiconductor and electronics industries here are bearing the brunt of the impact from the rapidly-spreading COVID-19, as the virus outbreak, which experts say is on track to become a pandemic, is dealing a major blow to their operations, according to experts, Sunday.
The semiconductor industry, which suffered hard times last year with sales drastically dropping due to the U.S.-China trade war and price declines, had been expected to recover from a shortfall in demand, but the market is likely to suffer from the virus outbreak, which has slowed down or suspended production, they said.
Smartphone and other electronic devices businesses are also likely to suffer from the spread of the virus because companies are sourcing components from China where factories are struggling to reopen as the authorities there attempt to control the disease.
What makes the situation more alarming is that the virus outbreak may compel them to shut down their factories.
Experts in the semiconductor industry say the odds are very low that manufacturing plants will be significantly affected by the virus because every production process is conducted in dust-free cleanrooms and employees wear cleanroom garments. However, concerns are still lingering given even a few minutes of downtime can result in huge losses.
Samsung Electronics said Saturday that an employee of its subcontractor at its chip manufacturing factory in Yongin, on the outskirts of Seoul, tested positive for coronavirus. The company said the employee worked at a facility near a cafeteria but had little contact with other people in the factory. Samsung added it would shut down the cafeteria until Sunday, but there are no impacts to its production lines.
Samsung also said it temporarily stopped operations of its smartphone plant in Gumi, North Gyeongsang Province, the same day, after a family member of one of its employees tested positive to the virus. The company added it has not decided how long the plant should be closed.
On Feb. 22, Samsung shut down the Gumi plant for three days after an employee tested positive for the COVID-19 virus.
LG Display also said Saturday it would shut down its module plant for three days after an employee at a bank in its Gumi plant was confirmed to be infected.
An official in the electronics industry said many companies are implementing various measures to prevent the spread of the coronavirus including asking their employees to work remotely, but expressed concerns of inefficiency.
“Companies are conducting some prevention measures such as asking employees to work from home, implementing flexible working hours so that they can avoid rush hour commutes and screening temperatures at entrances. But these measures are inefficient compared with working in the same office because communicating with each other helps organizations further develop their business plans,” said the official who asked not to be named.
“As we don't know exactly how long the situation will last, it feels like we are going through a long and dark tunnel,” he added.
The coronavirus is also expected to have a negative effect on the electronics business.
Due to the spread of the virus, shipments of smartphones in 2020 will decrease by 2.3 percent year-on-year to around 1.3 billion, according to market researcher IDC. The organization also estimated global shipments in the first half of this year will be reduced by 10.6 percent year-on-year.
According to data from market researcher TrendForce, the global shipment of notebooks in the first quarter of 2020 will be 27.5 million, which was previously estimated to be 35 million. The figure is a 35 percent decrease quarter-on-quarter.
“Assuming that the spread of COVID-19 can be contained, notebook production volume is expected to gradually recover in March, but this may not be enough to offset significant losses in February,” the researcher said adding the number of shipments will decrease “more than current projections” if the virus outbreak continues.