Semiconductor Supply Escape Crisis... Malaya's New Trigger (Comprehensive)

[Asia Economy Reporter Yujin Cho] It has been pointed out that the suspension of operations at semiconductor back-end process companies in the Asia region is acting as a trigger for the global semiconductor supply shortage. Inside and outside the industry, it is expected that the global semiconductor chip supply shortage, which caused production disruptions in the automotive industry, will continue into next year.

According to major foreign media, Wang Meihua, Taiwan's Minister of Economic Affairs, pointed out on the 1st (local time) that semiconductor testing and packaging processes in Malaysia, where COVID-19 is resurging severely, are becoming a new trigger for the semiconductor supply shortage crisis.

Semiconductors manufactured by large semiconductor companies such as Taiwan's TSMC are sent to companies in Southeast Asia, including Malaysia, for back-end processes such as testing and packaging. This region has recently been facing difficulties in factory operations due to the resurgence of COVID-19, becoming an obstacle to increasing semiconductor production volume.

Minister Wang said, "The focus of resolving the situation lies in advancing the resumption of production in Southeast Asian regions such as Malaysia as soon as possible," adding, "The challenge is to accelerate the recovery speed of production capacity, which is currently at about 80%."

Market research firm IHS Markit has lowered its global vehicle production forecast for next year due to supply bottlenecks in Asia, including Malaysia. Phil Armsrud, senior analyst at IHS Markit, said, "Due to the impact of COVID-19, the lead time for semiconductor back-end processes is expected to extend up to nine months."

He pointed out, "Companies responsible for semiconductor testing and packaging processes in Southeast Asia, including Malaysia, mostly operate on low-margin business models, making it difficult to make investments to expand facility capacity."

Inside and outside the industry, there are mixed predictions: some optimistic that the semiconductor supply chain crisis will ease within this year, and others expecting the same level of impact as this year to continue into next year. There is also a view that this is turning into a structural problem that may take several more years for full recovery.

The global finished vehicle industry has repeatedly suspended operations and reduced production due to a shortage of automotive semiconductors. General Motors (GM) recently announced a two-week extension of the suspension of Chevrolet production at its Ramos plant in Mexico. Hyundai Motor also halted operations at its Alabama plant in the U.S., which produces Sonata, Santa Fe, and Santa Cruz models, for a total of five days including September 3 and 7 due to the shortage of automotive semiconductors.

The Wall Street Journal (WSJ) reported that signs that the semiconductor supply shortage crisis is not over will be clearly revealed in the upcoming third-quarter earnings announcements. Market experts expect that global finished vehicle manufacturers' sales will sharply decline in the third quarter of this year due to production disruptions caused by semiconductor shortages.

Global consulting firm AlixPartners estimated that the global finished vehicle industry will suffer losses of $210 billion this year due to semiconductor chip shortages. This is double the forecast made in May.