It Begins: Samsung Shutters Smartphone Factory In South Korea After Virus Outbreak

Tyler Durden's Photo
by Tyler Durden
Sunday, Feb 23, 2020 - 07:35 AM

South Korea now emerges as the next hotspot of the Covid-19 outbreak that has been tormenting China for the last several months.

Late on Friday, South Korea reported 142 new confirmed cases, up a mindboggling 70% in just one day, to 346. A second death was also reported.

A virus outbreak in South Korea is expected to lead to similar economic disruptions that are currently visible in China. The most prone industries to supply chain disruption and factory shutdowns are electronic, automobile, and telecommunication firms. 

On Saturday, Samsung Electronics reported that a Covid-19 case was confirmed at its smartphone factory in the southeastern city of Gumi, resulting in a complete shutdown of the entire plant, reported Reuters.

Samsung said the manufacturing facility would be shut through the weekend as emergency disinfecting operations were underway. The area where the employee worked will be shut through next Tuesday, the company said, adding that all employees who came in contact with the infected person are now placed on self-quarantine (there was no mention of how many employees were under observation).

There was also no word on if Samsung would be testing employees for the virus, considering how easily transmittable and virtually undetectable the virus is in the incubation phase.

A three-hour bus ride north from Gumi to Icheon is the site of chipmaker SK Hynix, a key Apple supplier. We reported on Thursday that the company had a trainee test positive for the virus.

Hynix immediately told 800 employees late last week not to return to work and stay home for several weeks as a prevention measure to stop the spread of the deadly virus.

Samsung and Hynix are two major electronics makers in the country and are experiencing virus-related disruptions. 

Hyundai Motor and its sister Kia Motors, the two are considered the 5th largest automaker in the world, have operations based in South Korea, and are currently experiencing factory shutdowns due to part shortages from China. 

Deutsche Bank published a note last week outlining how South Korea made the list of highly exposed economies to China. In other words, economic disruptions in China would have a significant impact on South Korea. 

Now that the virus is quickly spreading in South Korea, it's only a matter of time before paralysis of its economy sets in, similar to the economic collapse in China. 

Former Morgan Stanley Asia chairman Stephen Roach warned last month that the global economy could be in a period of vulnerability, where an exogenous shock, such as the virus outbreak crushing factory output and killing consumption, could trigger the next worldwide recession.

With top electronic makers from South Korea to China shuttering plants and experiencing declining output – this all means lower chip demand, and the semiconductor bubble could finally have met its match.