Semiconductor Industry & COVID-19
COVID-19 has disrupted the US semiconductor industry chain. With the outbreak showing no signs of abating and the number of confirmed cases rising, the United States began a nationwide lockdown. The lengthy lockdown disrupted the flow of goods.
The port of Los Angeles, the largest port in the United States, is under constant pressure from incoming containers. Many workers were infected with COVID-19, and there was a shortage of labor.
The port is always heavily congested, and cargo piled up, slowing the arrival of large ships.
In addition, the production of factory goods was severely affected.
A semiconductor consists of several steps: design, manufacture, test, and package. When problems arise with critical suppliers in the industry, the closed-test process can’t guarantee the availability of the chips, so it’s hard to ship them.
Chips affect the entire industrial chain.
Semiconductor supplies in the United States have been hit hard through this crisis. The COVID-19 pandemic has had a severe impact on trade. The ports of Los Angeles and Long Beach, California, two of the nation's busiest, saw double-digit growth, setting records.
According to the California Trucking Association (CTA) and the Port Trucking Association of America (HTA), a large number of containers are stranded at Los Angeles and Long Beach, bringing the two major shipping ports to a near standstill and disrupting supply chains as imports surge.
In addition, there are about one-third fewer dockworkers on hand due to COVID-19 related problems. The workers fell out with the factory over labor. The dockworkers’ union announced a four-day halt to unloading at the port, which has prevented dozens of cargo ships from entering and unloading outside the port, which is believed to be the worst port congestion since 2004.
Beyond the port of Los Angeles, the blockage of the Suez Canal strained global supply chains.
The Suez Canal accounts for 30% of the world's daily shipping container traffic according to data from Veiga. The blockage of the Suez Canal has caused a massive loss of global trade. Many ships have been delayed and have incurred additional expenses because they cannot pass.
Some ships circumnavigated the Suez Canal which necessitated longer voyages and associated costs for weeks.
The high price of relying on the Suez Canal affects the flow of goods to European markets. Much of Europe's furniture and household goods are stuck in the canal, unable to complete their transactions. When these problems cannot be solved, prices start to rise.
COVID-19 has made supply chain production and acceptance difficult to resolve. An outbreak of infections at Taiwan Semiconductor, the largest company in southeast Asia by market cap, also hit global trade. Taiwan Semiconductor which makes chips for big tech companies such as Apple and Qualcomm could lead to a further global shortage of chips.
Taiwan Semiconductor manufactures more than half of the world’s most advanced chip production.
But hundreds of employees tested positive for the virus, and more than hundreds of workers were quarantined, slashing the company’s revenue for the month by a third.
Apple has been hurt by the shutdown, which has led to delays in its entire production line.
In addition to Taiwan Semiconductor, other semiconductor companies have also been reported to have large amounts of employees infected with COVID-19.
The rising number of infections in Taiwan has sent the island's capitalist markets convulsing. Many analysts worry that the chip crisis afflicting the global electronics industry will worsen. Taiwan Semiconductor is responsible for the packaging and for testing part of the chip production. And the shutdown of that part of the production has made downstream systems challenging to perform, which has caused massive shortages at large auto companies from Tesla to Ford.
Besides Taiwan, many semiconductor companies in Malaysia are also at risk of bankruptcy.
In early June, malls and most businesses in Malaysia began to close, and the country went into lockdown. As one of the world’s semiconductor export centers, dozens of semiconductor companies have invested here over the last few decades. Malaysia’s blockade has hit the chip industry hard.
While the COVID-19 pandemic has sent demand soaring in the electronics industry, the loss of chips has hobbled the entire industry. Production and supply of chips are struggling to keep up with existing demand.
Written by Yunyi Liang
Works Cited
Veiga, Alex. “Suez Canal Blockage Adds to Pressure Points in Global Trade.” AP NEWS. 29 Mar. 2021, https://apnews.com/article/europe-global-trade-egypt-coronavirus-pandemic-sue z-canal-166bc8f21e9705f2921a67ef2dea176c Accessed 23 Aug. 2021.