The wafer foundry giant Suzhou plant has been shut down due to epidemic disease. Some design companies have issued a supply warning. Analysts: fear of aggravating chip shortage.

On February 14, UMC said in a statement on its official website that its 8-inch wafer factory and warship chip manufacturing company in Suzhou had gradually suspended production activities in order to cooperate with the full staff inspection of the competent authority because an employee was suspected to have infected novel coronavirus. After the inspection, the company will resume work in full with the approval of the competent authority. The epidemic black swan once again invaded the fragile chip supply chain, and after the shutdown of the Suzhou plant, downstream IC design customers announced operational risks. Industry analysts told the Financial Associated Press that if the factory resumes work for more than a week, it will aggravate the current chip shortage problem.

A person in the wafer manufacturing industry told the reporter that wafer factories generally have pre-planning measures for the epidemic, including staggered shifts for employees living in concentration, keeping dining distance, working from home, and so on, if the epidemic does not spread further, it is expected to have a limited impact on the production and operation of the enterprise itself.

UMC also stressed in its official statement that the monthly output value of Suzhou and warships only accounted for about 5% of the overall consolidated revenue, and that the incident had no significant impact on the company's financial business and maintained its performance outlook for the first quarter.

However, for chip design companies that have been out of production for a long time, the emergence of a little shock in the upstream foundry will affect its tense nerves. Third-party market survey agency CINNO Research told reporters that in the current tight supply of 8-inch chips, if the factory needs more than a week to fully resume work, it will aggravate the chip shortage problem.

According to public data, Suzhou Hejian currently has a monthly production capacity of about 8w tablets, mainly providing 0.5micron to 110nm processes. OEM products are mainly consumer and automotive, industrial electronics, and the main customers include Lianyong, Si Lijie, Zhongying Electronics (300327.SZ) and Ziguang Zhanrui. At the recent results meeting, UMC said that it would continue to operate at full capacity in the first quarter of 2022, and contract prices would rise by another 5%.

In addition to Hejian, Jinglong Technology, a mainland subsidiary of Jingyuan Electronics, a closed testing company, has also been diagnosed by employees. CINNO Research told reporters that in response to the needs of mainland IC design customers, Jinglong technology testing business mainly includes driving IC, microcontroller, SIM card chip, storage, etc., driving IC, logic and storage IC each account for 30% of the production capacity.

So will this shutdown affect the shipments of downstream design companies? Zhongying Electronics, a listed company, said in response to reporters on the afternoon of the 14th that the company is still paying attention to the incident. On the evening of the 14th, Zhongying Electronics announced that the epidemic situation of suppliers and warships and Jinglong affected production and operation, and there may be a short-term delay in product supply; if Hejian is unable to resume work because of the epidemic, it will have a significant impact on the company's production and operation.

It is worth noting that Zhongying Electronics achieved multiple growth in lithium management chips and AMOLED display driver chips last year, and the company also significantly increased the advance payment to lock in upstream production capacity. According to the company's three-quarter report, the book value of its prepaid accounts as of September 30, 2021 was 290 million yuan, compared with 8 million yuan in the same period in 2020.