Malaysia's Silicon Valley is suffering losses over COVID-19 coronavirus
The reason for this was an outbreak of the COVID-19 virus, which cut off manufacturers from Chinese suppliers seeking to somehow slow down the virus's spread.
One such example is Pentamaster, a well-known semiconductor testing equipment manufacturer. As early as last year, it celebrated its best performance in 29 years, more than doubling its share and increasing its total sales.
However, since the outbreak of coronavirus in China began, the company has lost some of its Chinese workers, who were urgently taken home to reduce the spread of the virus, and problems with the supply of materials and parts have started.
2020 is not a particularly profitable year for the firm, which is predicted to be based on existing facts, such as a decline of more than 10% in the relatively short life of COVID-19.
"Even if you source from another country, the other country also depends on China," said Pentamaster Executive Chairman Chuah Choon Bin.
Penang found itself in the same difficult position. It's one of the world's largest electronics centers, and it had a long history of having trouble doing business in China until the trade wave gave it a boost.
Exactly there are factories of the largest electronics manufacturers, famous Intel, Broadcom, Apple Inc. and others. In general, 8% of the world production of electrical appliances is carried out in Penang.
Last year was extremely successful for Penang's companies, as they managed to attract a record number of investments. But already this year this number will be only one third of the record value - US $1.2 billion. The state government has announced that this decline has nothing to do with the coronavirus, and the reason for this is the investment life cycle.
According to analysts, coronavirus has not yet reached its peak, we will see its consequences only in the period April - June, when stocks of supplies from China will run out. Although some are already starting to calculate the increase in orders for their products, while China is busy fighting the virus.
"Good news: Product transfers from China are leading to more quotation requests and orders overflow," said Goh Guek Eng, managing director at semiconductor products assembler Hotayi Electronic. "Bad news: Materials are not coming in from China."
For example, Hotayi is virtually the main supplier of major companies such as Samsung Electronics, LG Electronics and Sharp, supplying them with 60% of the material components from China. Last year, its sales soared 40%, and this year's target of 20% was set, which is very much in question due to problems with shipments from China, which have not yet reached their peak.
Pentamaster also buys about 20-30% of its components for production in China. It even had to change the design of some products to smooth out the lack of parts from China.
"We're able to get supplies but the lead time is long - two to three months from Europe," he said, compared with two to three weeks from anywhere under normal circumstances.
A number of other firms may also find themselves at the center of the problem of supplying Chinese materials. These are electronics manufacturers such as VS Industry and ATA IMS, which receive about 30% of their components from China. Indeed, COVID-19 has a significant impact on the entire supply chain of companies, but this impact will not be so great, because the situation in China is already slowly improving.
"We expect our performance to be in line with the overall growth, resilience or lack thereof, in the global semiconductor market," said Vice Chairman Tan Seng Chuan.
Globetronics Technology shared its comments on the virus situation. Although the company does not receive direct supplies from China, the situation may have an impact on it as well.
"We had previously forecast the year over year growth for all semiconductors to be 5.5 per cent in 2020," said Kevin Anderson, senior analyst for power semiconductors at consultancy Omdia. With the virus, "now we think the range could be from -20 per cent (worst case) up to 2.5 per cent (best case), with a most likely of -3 per cent".
"All this depends very much on impact on the demand side as the virus spreads around the world and how quickly the electronics supply and logistics chains recover."
Qdos, which serves the world's largest smartphone manufacturers, is also reducing its growth forecasts. Now their forecast is only about 20%, said its chief executive Jeffrey Hwang.
"The supply chain in electronics and semiconductors is really long, so one way or another you touch China," said Hwang, whose company also has a factory in the Chinese city of Xiamen.
"China is a big supply chain that has served the world really well, so companies will not stop going to China entirely but probably they will cut down on dependence on China alone."