Taiwan Chip Packaging Hub Halts Production After COVID-19 Outbreak

King Yuan Electronics, a top 10 outsourced semiconductor assembly and test (OSAT) contractor in the world, announced Friday that it is halting production for two days after several employees were tested positive for COVID-19. A two-day shutdown shouldn't devastate the market, but amid an ongoing chip shortage -- largely stemming from chip packaging -- the news is still daunting. 

King Yuan halted all production at its two factories in Taiwan starting as of 5:20 p.m. Taipei time for 48 hours for for a full cleaning and disinfection. The action will decrease the company's output and revenue by 4-6% in June, the company said in a statement with Taiwan Stock Exchange. 

This should not significantly impact the company's output for the year. However, delays of at least two days may be impactful for some of King Yuan's clients. And this isn't encouraging news for the already supply-constrained microelectronics industry. 

King Yuan is the world's seventh largest OSAT contractor with $267 million in sales in Q1 2021. The company has multiple factories in Taiwan and its customer base includes Intel and Samsung.  

According to Reuters, 67 employees working at a King Yuan factory in the northern city of Miaoli contracted COVID-19. Taiwan's authorities plan to test 7,000 more people in the region. 

Taiwan closed down in early 2020 to avoid a local outbreak. But soon after Taiwan opened up earlier this year, the number of COVID cases began to grow and reached its highest point of the pandemic this spring. 

This outbreak has threatened operations of Taiwan's high-tech chip industry, including TSMC, the world's largest foundry, and companies like ASE Technology, Micron, UMC and Winbond.