“They Have to Pay”: Malaysians Create a New Era of Tip Crunch Supply Business

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FILE PHOTO: Workers inspect chips at the Unisem (M) Berhad factory in Ipoh, Malaysia, October 15, 2021. Reuters / Lim Huey Teng

October 20, 2021

liz lee

KUALA LUMPUR (Reuters) – Malaysian electronics company, the center for supplying the basic chips that power the world’s cars, smartphones and home appliances, knocks on doors to include long-term take-or-pay transactions by well-known customers Is. ‘Re – you can pay more if you want.

Manufacturers are rushing to replenish their depleted chip inventories during the coronavirus pandemic plant suppression, especially automakers that previously canceled their orders in anticipation of lower demand. Its chip shortages have blamed their production and are still disrupting supply chains, just as consumer demand grows with the global relaxation of COVID restrictions in everyday life.

In factories in Malaysia, operators such as chip packaging company Unisem are the leading buyers for the drive to sell chips to auto and electronic equipment manufacturers, who are demanding as many assembled chips as factory production. Even things are there. On the death of anyone.

However, Malaysia’s chip assembly industry, which accounts for a tenth of world trade of over $20 billion, favors high-end semiconductors, but has grown from years of low investment in basic chip production. Warned that at least two will continue. Year.

Avoiding COVID-19 infection in factories needs to be married to the need for companies to increase production which could lead to a complete shutdown.

“The shortage is very real,” said UNICEM president John Chia. “The (client’s) CEO told the problem directly to me that it was a serious problem … now they want to talk to me directly,” he told Reuters. ..

Chia declined to provide the name of the customer requesting greater supplies. Unisem’s customers include suppliers to global automakers and electronics companies such as Apple.

China’s Chengdu plant will be booked over the next year as it will take months to clear the backlog for some auto parts due to such strong demand, he said.

According to market research firm Yole Development, the pre-pandemic global outsourced chip assembly and testing industry is estimated to be worth around $23 billion and will grow to $30 billion by 2022.

Taiwan is the largest service provider with over 50% market share, followed by China, the United States and Malaysia. The latter includes suppliers and factories serving chip makers such as STMicroelectronics and Infineon, as well as automakers such as Toyota Motor Corp., Ford Motor Company and General Motors.

Malaysian Semiconductor Industry Association president Wong Shu Hai has warned that shortages are likely to continue for years. According to Wong, some customers are ordering more supplies, but long-term contracts of one to three years are now the norm in the new industry.

“It will take at least two to three years to meet demand,” Wong told Reuters.

generator shutdown

Companies like Unisem are on the rise. However, with a market cap of about $1.6 billion, Unisem is still operating at only 80% of its capacity to reduce the risk of outbreaks on factory floors, which could lead to factory-wide shutdowns.

Currently, 98% of workers are fully vaccinated, but factory outbreaks and national blockade orders have forced the Ipoh factory in northwestern Malaysia to temporarily close twice since June. .. Some automakers and semiconductor companies say the turmoil related to the pandemic in Malaysia has affected the supply chain.

GM CEO Mary Barra explained to Fox Business earlier this month https://www.foxbusiness.com/markets/general-motors-mary-barra-wall-street. In Malaysia, it was greatly affected by COVID. “

For Malaysian semiconductor production and export statistics:

https://fingfx.thomsonreuters.com/gfx/ce/znpnezkydvl/MalaysiaSemiconductors.png

The gradual launch at Unisem is in line with the launches of many other peers.

Globetronics Technology, which manufactures optical sensors, light-emitting diodes and integrated circuits for Apple, Samsung Electronics, German automakers and others, operates 90% of the factory’s production capacity despite an increase in orders. We are also concerned about rising costs.

“We had to adapt and pay attention to the well-being of our employees during the lockdown, including a variety of incentives such as cash to keep our employees motivated and productive,” Business & Operations said. Heng Chang Yi, vice president in charge, told Reuters.

For example, the Malaysian government’s strict work rules, which require frequent swab inspections and staff limits, also add cost pressures, she said.

“they have to pay”

Investors and analysts have poured billions of dollars into big names like Samsung and TSMC to develop more powerful and expensive ones, so the shortfall is in the technology to make older-generation chips costing less than $1. This is also the result of a lack of investment. -End tip.

“We have always considered these back-end semiconductors to be low-margin businesses, but suddenly we have added 5-10% pricing power,” said Best Principal Asset Management BHD in the ASEAN region. Chief Investment Officer Patrick Chan said.

In response to this demand, Unisem is expanding its factories in Malaysia and China. It will be ready in 12 to 15 months.

“We are on alert,” Chia said. “We’ve been hit in blue and black before, do you remember the era of dotcoms?”

“We now ask them (customers) to sign up for at least 70% of their expectations (volume). Even if they don’t give me the full amount, they have to pay.”

(Reporting by Liz Lee, Edited by Mi-Yeon Kim and Kenneth Maxwell)

“They Have to Pay”: Malaysians Create a New Era of Tip Crunch Supply Business

Source link “They have to pay”: Malaysians create a new era of tip crunch supply business

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