Chinas Factories at Risk of Double Whammy as Coronavirus Hits South Korea, Japan

BEIJING—The spread of the coronavirus in South Korea and Japan could mean a second wave of disruption at Chinese factories after the disease triggered a record contraction in activity last month.

Cases of the flu-like outbreak have jumped in South Korea and Japan, prompting some manufacturers there to partially suspend operations and risking a reduction in the supply of spare parts to factories in China as they restart work.

Chinese authorities have eased some travel restrictions and enabled some businesses to reopen.

But imports from South Korea and Japan play a key role in Chinas manufacturing economy, particularly the production and assembly of electronics goods.

“The lack of a few components can halt the entire production process, so if Japanese and Korean firms cant supply goods, then theyll increase headaches for assemblers like Foxconn,” said Dan Wang, a technology analyst at Gavekal Dragonomics, a research firm.

Apple iPhone maker Foxconn said in late February it was restarting production of its main plants in China, and warned its revenue would be hit this year due to the outbreak.

Foxconn did not immediately respond to a Reuters request for comment.

South Korea is the second biggest hotspot with over 4,300 confirmed coronavirus cases. Japan trails with nearly 1,000 cases, stemming mostly from infections onboard a cruise ship quarantined near Tokyo.

The epidemic triggered the sharpest contraction in activity on record at Chinas factories last month, a private survey showed on Mar. 2, after authorities imposed tough travel curbs and public health measures to contain the outbreak.

If the virus worsens in South Korea and Japan, analysts said Chinas factories could take another hit even as they stutter back to work.

China takes in a quarter of South Koreas total shipments abroad, importing $64 billion of semiconductors last year as well as billions of dollars in Liquid Crystal Display (LCD) and mobile phone spare parts.

“If the epidemic outbreak there escalates further, as Japan and South Korea are Chinas important trading partners, factory shutdowns, the suspension of logistics and reduction in exports would directly hit the supply to our upstream, midstream and downstream companies,” analysts at CITIC Securities said in a report.

Major South Korean exporters including Hyundai Motor and Samsung Electronics have partially shut their production lines after workers tested positive, while LG Display closed a display module plant for disinfection work until Tuesday.

Epoch Times Photo
Epoch Times Photo
An employee wearing a face mask works on a car seat assembly line at Yanfeng Adient factory in Shanghai, China, as the country is hit by an outbreak of a new coronavirus, on Feb. 24, 2020. (Aly Song/Reuters)

Cuts Both Ways

Despite some companies restarting operations, many small firms in China are still struggling to find enough workers to run plants, compounding the problems of manufacturers across Northeast Asia.

“Even though the situation in China seems to be improving, while Japan and Korea are getting worse, Chinese firRead More – Source