Samsung and LG Factories All Concentrated... Supply Chain Emergency from Vietnam (Comprehensive)

Production Disruptions in Factory Clusters Due to Strengthened COVID-19 Lockdowns
"Companies Should Purchase Vaccines" as Burden of Quarantine Costs Increases

[Asia Economy Reporters Kim Heung-soon and Cho Hyun-ui] In Vietnam, where a new variant virus combining the Indian and UK variants has emerged, a surge in confirmed cases has disrupted the supply chains of global information technology (IT) companies. Domestic companies operating production lines locally are anxious as local governments increasingly impose movement restrictions.

According to local media on the 31st, Bac Ninh Province in Vietnam, where about half of Samsung Electronics' annual smartphone shipments are produced, will implement a measure from the 2nd of next month to halt commuting of workers within the region. The intention is to minimize face-to-face contact during movement to block infections.

◆ Korean Companies' Emergency Measures Amid Repeated Lockdowns = Bac Ninh Province is home not only to Samsung Electronics' mobile phone factory but also Samsung Display's panel factory. The number of employees is approximately 20,000 and 25,000 respectively. A Samsung official said on the day, "The Vietnam subsidiary is strictly adhering to Bac Ninh Province government's quarantine guidelines to prevent the spread within the region," adding, "We are seeking solutions for this."

To reduce work disruptions caused by movement restrictions on employees, companies must independently provide accommodations. The plan is to utilize factory dormitories and temporary spaces as much as possible and secure nearby lodging facilities to house employees. However, securing temporary housing for tens of thousands, including local partner companies, is not easy, raising concerns about potential disruptions to operations and supply.

In northern Vietnam, global production bases of major IT companies such as Samsung Electronics, LG Electronics, and Apple are concentrated. LG Electronics has also decided to support accommodation costs so that employees living in restricted areas can commute near the factory. LG Electronics operates production lines for home appliances, mobile devices, and automotive parts in Haiphong, where many residents of Bac Ninh Province are also identified. Samsung Electronics' Ho Chi Minh subsidiary, which produces TVs and home appliances, is not as urgent as Bac Ninh Province but is closely monitoring government guidelines while maintaining normal factory operations.

Apple has decided to split production personnel into two shifts for two weeks. An Apple official, requesting anonymity, told foreign media, "This is a temporary measure," adding, "Without this, the production network would be further damaged." Foxconn and Luxshare, which respectively manufacture Apple's iPads, MacBooks, and AirPods on consignment, recently closed their factories in Bac Giang Province following orders from local governments.

Vietnam, once regarded as a model country for quarantine in the early stages of the COVID-19 pandemic, is experiencing a severe spread due to a variant virus that is more transmissible and replicates faster than the existing virus. More than half of the cumulative 6,856 confirmed cases occurred in the past month. Bac Ninh Province was hit hard, with nearly 700 confirmed cases during this period.

The Vietnamese government announced strengthened quarantine measures in Ho Chi Minh City the day after declaring the new variant virus "very dangerous." These measures, effective from that day for 15 days, include prohibiting gatherings of more than 10 people, minimizing outings, and maintaining at least 6 feet (1.8 meters) of distance. Some local governments with severe outbreaks have already implemented travel bans and curfews independently.

◆ Vaccine Purchase Costs Passed on... Companies Facing Double Hardship = The Vietnamese government is reportedly demanding that Korean companies operating locally bear various quarantine costs, including vaccine purchases. On the 28th, Dinh Tien Trung, Hanoi Party Secretary, stated, "To achieve herd immunity, 6 million vaccine doses are needed," adding, "Since the budget is insufficient, we hope companies will bear the purchase costs."

As the COVID-19 spread sharply reduces IT companies' production capacity, worsening the global supply shortage, companies are facing double hardships due to demands from both the central and local Vietnamese governments. As of the 26th, Vietnam's vaccination rate for at least one dose is only 1.0%, and those fully vaccinated with two doses are 0.02%, effectively zero.