A chip manufacture machine Photo: VCG

Semiconductor companies in and near Shanghai are ramping up efforts to resume production, despite lingering challenges posed by the COVID-19 epidemic in the city, raising expectations for accelerating speed in work resumption in the critical sector.

The Taiwan Semiconductor Manufacturing Co (TSMC) told the Global Times on Wednesday that its factory in Shanghai is operating at 100 percent capacity with 70 percent of the labor force.

Located in Songjiang district, the plant has implemented closed-loop management between the factory and dormitory. At present, the factory workers and those working from home cover 70 percent of the labor force, which is sufficient to achieve full production, TSMC said.

"Since the outbreak, TSMC has stocked up on masks, protective suits, disinfectants and other supplies. There is a complete supply chain for daily necessities for employees with sufficient food and shelter. Staff morale has been lifted," Joseph Hu, director of public relations at TSMC China, told the Global Times on Wednesday.

TSMC is among a number of 80 integrated circuit and supporting enterprises on a whitelist issued by the Shanghai government on Saturday to resume work and production. 

Companies on the list, including Semiconductor Manufacturing International Corp (SMIC), Hua Hong Semiconductor and  ASML, are also working under closed-loop management during the epidemic to ensure supply chain stability.

"Once some major chip manufacturers resume production, the impact on the entire industry chain should be reduced immediately. There should be no problem to restore the normal production of Shanghai and nearby regions within half a month," Ma Jihua, an industry veteran, told the Global Times on Wednesday.

Kunshan, a city in East China's Jiangsu Province neighboring Shanghai, with a large number of panel and printed circuit board enterprises supplying semiconductor firms in Shanghai, also allowed a couple of electronics companies to resume work to unclog the industry chain on Tuesday.

Foxconn, Brigates Microelectronics and ASE Kunshan were among the first batch of 60 "epidemic-free enterprises" to resume work on the premise of sufficient prevention and control measures and closed-loop management.

"The coordinated moves of Shanghai and Kunshan are expected to accelerate emergency work resumption of the semiconductor industry by unclogging the upstream and downstream industries," Ma said.

However, there are still some enterprises not on the whitelist and they haven't resumed work. The longer the situation lasts, the more impact on the supply structure of the whole industry chain, analysts warned.

US semiconductor supplier Onsemi said on Monday that its China distribution center was forced to shut down due to the disruption in logistics, according to media reports.

"Enterprises that have not resumed work risk a loss of orders, and smaller chip enterprises may face even more difficulties in the cooling market," Ma said.

According to data released by the National Bureau of Statistics, China produced 80.7 billion semiconductors in the first quarter, down 4.2 percent year-on-year, the worst performance since the first quarter of 2019, dragged down by weak demand for consumer electronics such as TVs and smartphones as well as production disruptions in regions including Shanghai.

The uncertainty of the epidemic and the sharp drop in shipments of consumer electronics will be transmitted to the manufacturing end, causing chip companies to reduce investment and production scales, Ma said.

"It is expected that the contraction period of the semiconductor industry will extend and last through the whole year of 2022," Ma said.