China’s Xi’an lockdown hits some of the world’s largest chipmakers

By Diksha Madhok, CNN Business

Two of the world’s biggest chipmakers are warning that Covid-19 outbreaks and stringent lockdowns in a major Chinese industrial hub are hampering their operations.

Samsung and Micron said this week that they’ve had to adjust operations in the northwestern city of Xi’an, which is experiencing one of China’s worst community outbreaks of the coronavirus pandemic. Authorities have responded by enacting sweeping measures with an intensity and on a scale rarely seen since Wuhan, the pandemic’s original epicenter.

Any slowdown in output from the city risks worsening the global chip shortage, an ongoing crisis that has limited the supply of everything from iPhones to new cars.

Samsung said Wednesday that it had to “temporarily adjust operations” in Xi’an. The South Korean giant added that protecting its workers in the city remains its “top priority,” and that it plans to take “all necessary measures, including leveraging our global manufacturing network, to ensure that our customers are not affected.”

Samsung has invested more than $10 billion in Xi’an, and employs more than 3,300 people there. According to the Korea Economic Daily, output in the city accounts for over 40% of Samsung’s total global production of NAND memory chips, a product found in smartphones, tablets and hard drives.

Samsung declined to comment when asked by CNN Business for more information about how production in the city was being affected.

American chipmaker Micron also said Wednesday that Xi’an’s lockdown could impact the production of its DRAM memory chips, which are used in computers, as the company has had to reduce its workforce at the site.

Micron added that it is tapping its “global supply chain, including our subcontractor partners,” to meet customer demand, but warned that “there may be some near-term delays as we activate our network.”

“New or more stringent restrictions impacting our operations in Xi’an may be increasingly difficult to mitigate,” the company said. It stressed that safety of its team in the city is its “top priority”, and it is taking measures ranging from physical distancing to on-site testing to minimize the risk of virus transmission.

Xi’an, an ancient city in Shaanxi province, has reported 1,117 total cases in the latest outbreak. It rolled out city-wide testing and placed its 13 million residents under a strict lockdown last week, closing schools, public venues and transportation. The lockdown is China’s largest since Wuhan, which sealed off 11 million people.

— Gawon Bae and CNN’s Beijing bureau contributed to this report.

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