Global chip shortages may worsen as Taiwan battles increasing COVID-19 cases

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Key Taiwanese semiconductor manufacturer, and Apple supplier, King Yuan Electronics, shuts down two production sites due to a COVID infection cluster, may aggravate supply shortage.

King Yuan Electronics has confirmed that 77 employees have contracted the coronavirus at its Miaoli manufacturing site and it will shut down production. This new infection cluster has also spurred the Taiwanese government to review living conditions and test workers in Taoyuan, Hsinchu, and Miaoli.

The report from Nikkei Asia says King Yuan Electronics will suspend all domestic production for 48 hours starting Friday. The suspension of production in Miaoli and Hsinchu could affect the greater chip industry as global chip shortages continue.

"We will halt production from tonight's shift from 19:20 for 48 hours to Sunday evening (June 6) to thoroughly clean and disinfect the entire working environment," King Yuan spokesperson Aaron Chang told Nikkei Asia. "The move is to address the growing concerns from our employees and clients about their safety of coming into the offices and production facilities. We hope production can gradually be restored after the move."

King Yuan Electronics estimates production will be impacted for June, reducing revenue and output by 4% to 6%. The company will attempt to recover lost time by running "super hot" production runs after manufacturing resumes.

The looming danger of a COVID-19 induced shutdown has other chip manufacturers concerned. Taiwan health authorities say that Greatek Electronics also had a cluster of infections of nine people, and testing of its 4,000 employees will begin Saturday.

Taiwan sits at COVID-19 warning level 3, one level before complete lockdown. The Health Ministry says that the plan to reduce the warning level on June 14 has been scrapped due to the increase in case counts.

Taiwan has had more than 8,000 confirmed cases since May 11, with 187 dead. So far, the threat of lockdown and increased cases have not affected production at the Taiwanese chipset manufacturers.

"If the majority of the population in Taiwan do not receive COVID vaccines soon, I fear it is only a matter of time until more and more companies will be forced to halt production due to the spread of the virus," an Apple supplier executive told Nikkei Asia.

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