Factbox-How COVID-19 in Southeast Asia Threatens Global Supply Chains

SINGAPORE (Reuters) – New coronavirus outbreaks in Southeast Asia have affected factory activity across sectors, threatening the region’s recovery from the COVID-19 pandemic and disrupting global product supply such as clothing, automobiles and electronics.

FILE PHOTO: Soldiers in protective gear disinfect a street following the recent outbreak of coronavirus disease (COVID-19) infections in Tucheng District of New Taipei City, Taiwan, on May 27, 2021. REUTERS / Ann Wang / File Photo

Coronavirus restrictions have led companies to close factories and suspend or scale back operations at a time when the Asian manufacturing sector is already grappling with rising raw material costs and signs of a slowdown in the economy. Chinese economy.

Vietnam, Malaysia and Thailand are three of the region’s main manufacturing centers and produce goods for some of the world’s biggest consumer brands.

VIETNAM

A wave of coronavirus since April has forced Vietnam’s largest cities and industrial centers to impose strict closures, prompting electronics, clothing and footwear manufacturers to suspend or scale back their operations. The restrictions have been relaxed in recent weeks.

The outbreak first hit industrial areas in the north, where suppliers to Apple, Samsung and other global tech companies are located.

In May, the northern province of Bac Giang ordered the temporary closure of four industrial parks, three of which house Foxconn’s production facilities in Taiwan.

The outbreak spread further south, and in July, Ho Chi Minh City and neighboring industrial provinces imposed strict lockdown measures.

That month, Taiwanese company Pou Chen Corp, which makes shoes for Nike and Adidas, suspended operations at its factory in Ho Chi Minh City and Changshin Vietnam, a South Korean company making shoes for Nike, suspended operations at its factory in Ho Chi Minh City and Changshin Vietnam, a South Korean company making shoes for Nike. closed three of its factories.

Nike has cut its sales forecast for fiscal 2022 and has warned of holiday delays. Buyers of Apple’s new iPhone 13 are facing longer-than-expected delivery times due to the outbreak in Vietnam, where components for the device’s new camera module are being assembled.

The Vietnam Textile and Clothing Association said several international fashion brands have diverted their orders from Vietnam and 60% of the country’s clothing and shoe manufacturers have been fined for slow deliveries.

MALAYSIA

Several automakers and semiconductor companies have said in recent months that disruption from the pandemic in Malaysia is hitting supply chains.

Malaysia imposed a lockdown in June as infections hit record highs, but has gradually eased restrictions on manufacturing since July.

Restrictions in Malaysia, which supplies around 67% of the global rubber glove market, also forced many glove manufacturers to shut down operations in June and July.

Malaysia is home to factories serving semiconductor manufacturers such as STMicroelectronics and Infineon in Europe, as well as major automakers such as Toyota Motor Corp and Ford Motor Co.

STMicroelectronics said in July it had temporarily closed its assembly plant in Malaysia for 11 days due to the coronavirus.

German chipmaker Infineon said in August the company would be hit by double-digit shutdowns at its plant in Malaysia.

That same month, Ford Motor Co announced that it would temporarily shut down the U.S. plant that builds its best-selling pickup truck due to a shortage of semiconductor-related parts caused by the outbreak in Malaysia.

THAILAND

Thailand imposed tighter restrictions in July and August in high-risk provinces, including Bangkok.

To avoid factory closures seen elsewhere in Southeast Asia, the government has adopted ‘bubble and seal’ measures, whereby confirmed cases of COVID-19 are sent for treatment and close contacts isolated from others. workers.

But several companies have had to temporarily shut down operations for a deep clean-up after cases of COVID-19 in recent months, including Charoen Pokphand Foods, Thai Plastic Industrial and Soomboon Advance Technology.

In July, Toyota halted vehicle production at three of its factories in Thailand due to parts shortages caused by the pandemic.

Thailand is Asia’s fourth largest auto assembly and export center for some of the world’s largest automakers such as Toyota and Honda.

A shortage of migrant workers, due to strict border controls, infections and quarantines, has also affected food and rubber production.

Siam Agro-Food Industry, a Thai exporter of processed fruit, was only able to fill 400 of the 550 available positions because workers, who have returned to their home countries, cannot enter Thailand due to the shutdown borders.

Reporting by Liz Lee in Kuala Lumpur and Orathai Sriring in Bangkok; Written by Ana Nicolaci da Costa; Editing by Sam Holmes


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