COVID-19 Lockdown in China Threatens DRAM Supply Hiccup

Article By : Alan Patterson

Samsung and Micron have slowed operations at their memory chip facilities in Xi'an after a COVID-19 outbreak forced the city into lockdown.

Samsung and Micron have slowed operations at their memory chip facilities in Xi’an after a Covid outbreak forced the city of 12 million to enter lockdown on Dec. 23.

“Due to the ongoing Covid-19 situation, we have decided to temporarily adjust operations at our manufacturing facilities in Xi’an,” Samsung announced in a three-sentence statement on its website.

“The city’s closure has reduced Micron’s team member and contractor workforce at our Xi’an site, resulting in some impact to output levels of our DRAM assembly-and-test operations there,” Micron said on its website.

Near-term delays in product shipments are possible as Micron activates its supply chain of contractors to make up for any shortfalls, according to the company. New or more stringent restrictions affecting operations in Xi’an may be increasingly difficult to mitigate, Micron added in a statement.

The Xi’an lockdown is the latest crimp in the global semiconductor supply chain. Pandemic-driven chip shortages that emerged last year were worsened by power outages during February 2021 in Austin, Texas, where Samsung, NXP and Infineon have semiconductor facilities. A fire last year at a Renesas fab in Naka, Japan, also halted supplies of chips used in automobiles.

China has adopted a zero-tolerance approach to Covid outbreaks that includes lockdowns. After more than 1,000 residents of Xi’an tested positive for the coronavirus, the city was locked down.

Xi’an accounts for about 15 percent of the world’s NAND output, according to Jim Handy of Objective Analysis. That number is based on estimates of Samsung’s product mix, which the company doesn’t disclose, Handy said. The chip analyst said he did not have a similar estimate for Micron.

NAND is used in smartphones, solid state drives, USB flash drives and flash cards. All flash applications will be equally affected as a result of any production decrease, according to Handy.

So far, the impact appears to be minor, he said.

“I haven’t heard anything that leads me to believe that either of these facilities will seriously reduce their output,” Handy said. “I find it likely that they will continue to produce at their former levels unless the situation gets significantly worse.”

A significant shortage can cause price spikes. That scenario occurred in 2017 for NAND and 2018 for DRAM when panicked chip buyers in China grew their inventories in response to trade war concerns, Handy said.

For example, he said, spot DRAM prices zoomed from $2.62 to $6.38/GB, or 144 percent in 13 months. NAND prices jumped 50 percent in early 2017 from $0.21 to $0.31/GB.

Samsung likely has partitioned its Xi’an campus to reduce the risk of a campus-wide shut down, according to Handy. Employees in one section may be restricted from visiting an adjoining area, even though they are all on the same campus, he added.

Large Asian chip facilities typically include housing for workers. The Xi’an government probably has allowed workers in dormitories to continue their normal duties as long as they don’t interact with anyone off campus, Handy said. While limiting workforce reductions, there’s still the issue of getting supplies and other necessities like food delivered to employee cafeterias, he added.

This article was originally published on EE Times.

Alan Patterson has worked as an electronics journalist in Asia for most of his career. In addition to EE Times, he has been a reporter and an editor for Bloomberg News and Dow Jones Newswires. He has lived for more than 30 years in Hong Kong and Taipei and has covered tech companies in the greater China region during that time.


Subscribe to Newsletter

Leave a comment