Covid Lockdown In China’s Xian May Interrupt Memory Chip Production, Warns Samsung, Micron

Two of the world’s leading memory chip manufacturers, Samsung Electronics and Micron Technology, have cautioned that tight Covid-19 restrictions in the Chinese city of Xian may interrupt their chip production operations.

The city’s closure adds to an already difficult year for exporters, who are dealing with dramatically higher freight costs while raw material prices, particularly semiconductors, surge due to the pandemic.

Micron said on Wednesday that the restrictions could cause delays in the supply of DRAM memory chips, which are widely used in data centers.

The rigorous limits, which went into force earlier this month, maybe more difficult to overcome, according to Micron, and have resulted in lower personnel levels at the manufacturing facility.

Samsung Electronics also announced on Wednesday that activities at its Xian production facility for NAND flash memory chips, which are used for data storage in data centres, cellphones, and other electronic gadgets, will be temporarily adjusted.

According to analysts in Seoul, chips produced at Samsung’s Xian NAND plant primarily travel to China, with only a few shipments to other countries. They stated that Chinese server businesses are among the major buyers of the chips generated in the plant.

From December 23, Chinese officials have put strict restrictions on travel within and out of Xian, as part of Beijing’s effort to quickly suppress epidemics when they emerge.

With almost 1,100 cases in total during the most recent flare-up, the COVID-19 outbreak in Xian is the largest seen in any Chinese city this year.

“We are tapping our global supply chain, including our subcontractor partners, to help service our customers for these DRAM products,” Micron said in a blog post.

“We project that these efforts will allow us to meet most of our customer demand, however there may be some near-term delays as we activate our network,” the company said.

Micron went on to say that it was attempting to reduce the risk of virus transmission by implementing measures such as physical separation and on-site testing, as well as advocating immunization.

One of the major foreign ventures in China is Samsung’s memory chip business in Xian. According to TrendForce, the tech giant has two production lines in Xian that produce sophisticated NAND Flash products, accounting for 42.5 percent of its entire NAND flash memory production capacity and 15.3 percent of its overall global output capacity.

Samsung noted in a late October earnings call that it had low inventories of NAND chips going into the July-September quarter and planned to normalize levels during that period.

In January, it is scheduled to release earnings for the months of October and December.

(Adapted from TheStar.com)



Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability

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