hankyoreh

As Chinese factories halt operations because of the outbreak of the novel coronavirus, South Korean companies with factories on the ground in China are facing an emergency. As assembly lines grind to a halt at Chinese factories in critical industries — including home appliances (Samsung Electronics), automobiles (Hyundai Motor Company), and electric car batteries (SK Innovation) — production is being interrupted and the supply of Chinese-made parts is being cut off, leaving more and more South Korean factories with no work to do.

Industry sources told the Hankyoreh on Feb. 2 that a Samsung Electronics factory in Suzhou, in China’s Jiangsu Province, that produces household appliances will be left idle until Feb. 8, and Chinese factories that produce air conditioning and automobile parts for LG Electronics are also delaying their reopening according to a Chinese government order to extend the long vacation for the Chinese New Year, which was supposed to end in January. The majority of LG Electronics’ 16 factories in China will remain closed through Feb. 9.

Hyundai Motor, which has a factory in Chongqing, and Kia Motors, which has a factory in Yancheng, is planning to keep its assembly lines idle through Feb. 9. That’s also the plan for an SK Innovation factory in Changzhou, in Jiangsu Province.

Since semiconductor industry exports would be seriously harmed by a work stoppage, those companies are keeping their Chinese factories running, though with fewer workers than normal, and keeping a close eye on the situation. Samsung Electronics and SK Hynix are continuing to manufacture products at their Chinese semiconductor plants, drawing upon employees who stay in company dormitories and who haven’t had any contact with the outside. Samsung Display is also still operating its Chinese panel production facility. LG Display continues to manufacture display panels and has only halted operations at its Yantai factory, where those panels are assembled.

The pause on operations at most of China’s parts factories is also impacting the South Korean companies they supply. Ssangyong Motor decided to stop operations at its Pyeongtaek plant on Feb. 4-12 because the closure of a Chinese parts factory had interrupted its supply of wiring. “We only had enough wiring in inventory to keep the factory running through Feb. 3, and our Chinese supplier informed us that they’d be taking a break through Feb. 9,” said a spokesperson for Ssangyong Motor.

There’s even been a confirmed case of the novel coronavirus at a Chinese company that supplies wiring to Hyundai Motor. If Hyundai runs low on its current stock of parts, it might have to shut down some of the production lines at its domestic factories as well. South Korea’s automakers are looking for alternative suppliers in case they run out of parts normally sourced in China.

If the current situation drags on, it’s likely to have an impact on South Korean companies’ first quarter performance. POSCO has suspended operations at its factories in China. “We’re expecting a contraction of short-term demand as factories in automobiles and other related industries halt operations,” said a POSCO spokesperson.

“We aren’t facing any immediate operational problems in semiconductor production, but we’re drawing up emergency plans in case the situation becomes protracted, which would be a big deal,” said a spokesperson for SK Hynix.

By Shin Da-eun, staff reporter

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