SINGAPORE / HANOI – The coronavirus epidemics ravaging Southeast Asia have sparked a wave of production cuts among automotive suppliers, with the ripple effect closing assembly plants well beyond the region.
Swiss chipmaker STMicroelectronics was told this month that a factory in Johor state in southern Malaysia is set to shut down. More than 200 workers have been infected, according to local authorities. The facility has been intermittently shut down since July.
Although the plant has resumed operations, the repercussions continue to be felt. Activity at the plant should have been robust, given the global semiconductor shortage, but the shutdowns weighed on deliveries.
Malaysia has recorded more than 20,000 new cases of COVID per day. The government imposed its first nationwide lockdown in June. With workforces in automakers and parts factories limited to just 10% of capacity, production in some states had all but come to a standstill for an extended period.
The ASEAN region has served as a manufacturing hub for the Japanese auto industry. According to the Japan Auto Parts Industries Association, it is home to about 30% of the production sites of Japanese auto suppliers, more than any other region.
The Southeast Asian auto parts industry, valued for its low-cost workforce, supplies parts not only to the region, but also to Japan, the United States, China and elsewhere . Recent epidemics have disrupted this dynamic.
Southeast Asian countries beyond Malaysia are struggling with infections, hampering parts production.
New cases in Vietnam, with Ho Chi Minh City as the epicenter, have exceeded 10,000 per day. Hot spot workers must sleep on site to keep the plant running. The number of factory workers is also limited to between 30 and 50% of normal levels.
“Utilization rates decline in proportion to staffing levels,” said an official at a parts maker in Ho Chi Minh City.
When factories suspend operations for coronavirus cases, the broader supply chain is affected.
Japanese automotive suppliers Sumitomo Electric Industries, Yazaki and Furukawa Electric have wire harness factories in Vietnam. The Southeast Asian country overtook China to become the main source of importing wire harnesses to Japan in 2014, according to the Japan Foreign Trade Organization. Vietnam accounted for a share of around 40% in 2020.
The complex task of bundling electrical wires into wire harnesses is done largely by hand, requiring an army of workers.
But as the coronavirus sweeps through Vietnam, cable harness makers cannot find manpower and are being forced to cut production.
One fifth of Yazaki’s bases are located in Southeast Asia, which represents 17% of consolidated sales. Yazaki has two factories in Vietnam and production appears to have been partially impacted.
In the Vietnamese operation of Furukawa Electric, “plant usage has declined since July,” according to a company representative.
Koito Manufacturing, a Japanese headlight maker, restarted a Malaysian factory on Tuesday after shutting it down in early June.
But “future production is uncertain as the use of factories at automakers is not stable,” said a representative from Koito. Japanese materials makers such as Toray and Mitsubishi Chemical have cut production in Southeast Asia of automotive products.
Japanese automakers are finding it increasingly difficult to source components. Daihatsu Motor said on Friday it would suspend operations at four Japanese assembly plants for up to 17 days. In addition to the global semiconductor shortage, supplies of other components from Malaysia and Vietnam have stalled.
Production will decrease between 30,000 units and 40,000 units between August and September. Production will fall by around 19% to 25% over the year.
Daihatsu’s parent company Toyota Motor will cut September’s global production volume by 40% from its previous target, Nikkei reported Thursday, mainly due to the shortage of auto parts from Southeast Asia. . The decision will reduce overseas production by 220,000 vehicles.
This month, Honda Motor cut production in Guangzhou, China by 20,000 vehicles, down 20% from the initial production plan at the end of July. In Japan, the automaker has temporarily suspended operations at its Suzuka plant in Mie Prefecture.
Not only has the chip shortage weighed on Honda, but the automaker is also grappling with a delayed supply of components from Indonesia and Thailand.
Nissan Motor closed an assembly plant in the US state of Tennessee for two weeks due to semiconductor supply issues in Malaysia. This decision is expected to reduce the production of tens of thousands of vehicles.
Auto suppliers have built factories in several Southeast Asian countries to maintain sustainable shipments around the world. But the pandemic has upset this strategy.
“In Southeast Asia, there are many instances where complementary supply chains have been created across the region,” said Takashi Horii, senior researcher for Asia at Fourin, an intelligence firm. Nagoya-based automotive industry. “If production stops in a country, there is a risk that supplies to that region will be disrupted. COVID restrictions in [Southeast Asian] nations are already becoming country risks. “
Additional reporting by Ryo Asayama in Tokyo and Ryotaro Sato in Osaka.