Samsung and Micron warn that China’s Xian lockdown could disrupt memory chip manufacturing

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Workers in protective suits stand at an entrance to a residential area of ​​a university that is closed after the coronavirus disease (COVID-19) outbreak in Xian, Shaanxi Province, China, December 20, 2021. China Daily via REUTERS / File Photo

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  • The lockdown of Xian is adding to global supply chain problems
  • Samsung and Micron warn that a lockdown could hit their memory chip factories
  • Micron expects delivery delay for DRAM memory chips
  • Samsung has 2 major production lines that make NAND flash products

Dec 30 (Reuters) – Samsung Electronics (005930.KS) and Micron Technology (MU.O), two of the world’s largest memory chip manufacturers, warned that strict COVID-19 restrictions are disrupting their chip manufacturing bases in the Chinese city of Xian could be in the area.

The lockdown in the city puts further pressure on global supply chains and contributes to an excruciating year for exporters facing sharply higher freight costs even as prices for commodities, including semiconductors, skyrocket amid the pandemic.

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

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The severe restrictions that went into effect earlier this month could have become increasingly difficult to mitigate and have resulted in reduced headcount at the manufacturing site, Micron added.

Samsung Electronics also said Wednesday that it will temporarily adjust operations at its Xian manufacturing facilities for NAND flash memory chips, which are used for data storage in data centers, smartphones and other tech devices.

Seoul-based analysts said chips made at Samsung’s NAND Xian plant mainly go to China with limited overseas shipments. Some of the biggest demands for the type of chips the facility makes are from Chinese server companies, they added.

Chinese officials put strict travel restrictions on travel in and out of Xian from Dec. 23, in line with Beijing’s drive to contain outbreaks as soon as they occur.

The COVID-19 outbreak in Xian is the largest any Chinese city has seen this year, with a total of over 1,100 cases during the recent flare-up.

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

“We expect these efforts will meet most of our customer demand, but there may be short-term delays in activating our network,” the company said.

Micron added that it was working to minimize the risk of virus transmission and was taking steps such as physical distancing and on-site testing and encouraging vaccination.

Samsung’s memory chip plant in Xian is one of the largest overseas projects in China. The tech giant has two production lines in Xian that make advanced NAND flash products, which, according to analytics provider TrendForce, account for 42.5% of its total NAND flash memory production capacity and 15.3% of its total global production capacity.

Samsung said on a conference call in late October that the company entered the July-September quarter with a low inventory of NAND chips and intended to normalize levels during that quarter.

The October-December earnings results are expected to be announced in January.

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Reporting by Manya Saini in Bengaluru, Joyce Lee and Heekyong Yang in Seoul; Letter from Shri Navratnam; Adaptation by Maju Samuel and Himani Sarkar

Our Standards: The Thomson Reuters Trust Principles.


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