The situation in Japan and South Korea has not been effectively controlled, and the global industrial chains of semiconductors and automobiles may be impacted. To avoid being passive, Chinese companies should choose more than one supplier to spread the risk. At the same time, accelerate the pace of technology, product upgrading, in order to increase market share.

As the new crown pneumonia epidemic continues to spread around the world, South Korea and Japan have become the high incidence areas, and are the second and third worst countries in the world respectively.

As of February 28, the statistics released by the central department of epidemic prevention and control of the republic of Korea showed that up to 16 o 'clock on the same day, the republic of Korea increased 315 new cases of coronavirus infection from 9 o 'clock on the same day, the cumulative number of confirmed cases increased to 2337. A total of 919 new cases of pneumonia have been reported in Japan, including 200 in the country, 705 passengers and crew of the princess diamond cruise ship and 14 people who returned home on chartered flights by the Japanese government.

Japan and South Korea are powerful countries in the semiconductor industry as well as major auto exporters. Experts and institutions believe that, given that the epidemic in the two countries has not been effectively controlled, the affected enterprises will continue to increase in the future, and the global industrial chain of semiconductors and automobiles may be impacted. In this context, how should China respond to the multiple challenges facing the industrial chain?

Affected by the Japanese and Korean enterprises will continue to increase

South Korea has now declared a maximum closure of the worst-affected areas, namely daegu and gyeongsang north provinces. North gyeongsang province, as the largest administrative region in area, is also an important manufacturing region in South Korea. Its affiliated city of yuwei is known as the "silicon valley" of South Korea. Samsung, samsung SDI, LG electronics and LGD all have factories in the park.

According to the preliminary statistics of the Korean chamber of commerce and industry, there have been large enterprises including samsung electronics, SK hynix, as well as nearly 100 small and medium enterprises, which have been diagnosed with new pneumonia, suspected patients, or contact with relevant personnel caused by the suspension of production, isolation cases. In addition, hyundai has been forced to halt production at its factories in South Korea because of a shortage of parts.

In Japan, a survey of domestic enterprises by Tokyo industrial and commercial Research found that as of February 16, among the 12,348 enterprises that responded effectively, 2,806 enterprises said that the new type of crown pneumonia has affected corporate activities, accounting for 23% of the total. By industry, manufacturing enterprises (944), followed by retail and service industries. In addition, another 44% of enterprises said, "although the impact has not yet been shown, but may be affected in the future"; Thirty-seven per cent said the outbreak would have an "impact on the supply chain"; Nineteen percent said they expected "more red tape" in the future.

Remarkably, that was three weeks ago. The number of confirmed cases in Japan has roughly doubled since then, while the number of new cases in South Korea has only surged to more than 2,000 since the health ministry declared a "super-outbreak" in the city of daegu on Feb. 19, making it one of the worst affected countries overseas.

While the outbreak has not yet had a significant impact on local companies in Japan and South Korea, it still requires vigilance. Min hailan, a consultant at nomura research (Shanghai) consulting co., LTD. 's communications and ICT industry department, told the international finance news that the number of companies affected is certain to increase as the current outbreak is not effectively controlled.

"The outbreak in China coincides with the Chinese New Year holiday. If the outbreak in Japan and South Korea enters the shutdown phase, it may take longer than we do to stabilize and control the outbreak. "Said min.

Semiconductor and automotive chains may be hit

From the perspective of trade, public information shows that in 2018, the rok mainly exported mechanical and electronic products, transportation equipment, base metals and products to the world, and mechanical and electronic products, chemical products, optics, clocks and medical equipment to China. Japan's top three exports to the world are mechanical and electrical products, transportation equipment and chemical products.

Japan and South Korea are both semiconductor industry powerhouses, and their importance in the upper reaches of the electronics industry chain cannot be ignored, and analysts believe the semiconductor industry is likely to bear the brunt of the economic impact of the outbreak.

Jin-fu zhang, a professor at the university of guizhou in an interview with the international financial newspaper reporter said that South Korea is one of the leading producer of dynamic random access memory, Japan is all kinds of chip is, predictably, the memory will be out of stock, and other kinds of chip will be out of stock, chip prices is certain, coupled with the technology blockade, the entire semiconductor industry chain of China is a big shock. Although China's homegrown IC design firms have grown over the past decade, they still rely on imports, so the entire supply chain is vulnerable.

"In high-end manufacturing areas such as semiconductors, Japanese companies have an absolute advantage in the world. Taking silicon wafers, the core material of semiconductors, for example, half of the world's production is now concentrated in Japanese companies such as shin-etsu and senko. Therefore, the escalation of this outbreak may affect the output capacity of the entire semiconductor industry, which in turn affects the manufacturing of related electronic products globally and in China."

In South Korea, samsung and SK hynix are second and third with 12.5% and 5.4% of the global semiconductor market, respectively, according to Statista. In flash memory, the two companies together had more than 70% of the DRAM market in the fourth quarter, according to TrendForce. Huaxi securities pointed out that south Korean enterprises samsung, SK hynix for the global storage plant, if the new crown pneumonia epidemic in South Korea further spread, or will accelerate the global memory chip prices.

In addition, the epidemic on the automotive industry supply chain can not be ignored. Auto industry commentator zhong shi told the international financial times that when the outbreak first spread in China, it had a big impact on the global auto supply chain because many factories in China worked for global auto companies. Now, the epidemic is also serious in Japan and South Korea. Because Japan and South Korea are big auto exporters, although they have factories all over the world, some parts are exported from Japan and South Korea to provide products to all markets in the world, so now the export of Japanese and South Korea vehicles and the supply of parts will have an impact.

According to min, the major Japanese auto companies all have factories in China, and many non-japanese auto companies also use Japanese engines, gearboxes, airbags and other products. Therefore, if there is a problem in the supply of Japanese auto parts, it may lead to a series of shocks such as production stagnation.

China should accelerate industrial upgrading

It is worth mentioning that the "March 11" earthquake in Japan in 2011 had an impact on the asia-pacific and global semiconductor industry, but it also accelerated the external transfer of Japan's semiconductor industry, and many Chinese semiconductor material companies realized import substitution of Japanese semiconductor materials.

Some experts and institutions believe that Chinese companies should step up research and development and the pace of import substitution is expected to speed up.

"To avoid another passive situation, multiple suppliers should be selected to spread the risk," says Mr Min. In fact, China also has many fast-growing enterprises in such fields as semiconductor materials. Although they are not as technologically advanced as the leading enterprises, they can relieve the pressure as an alternative. In such an environment, Chinese enterprises are bound to step up the pace of technology and product upgrading to increase market share."

At present, although the growth rate of the global semiconductor industry has slowed down significantly, and the year-on-year growth rate of sales in the first three quarters of 2019 is negative, the growth rate of the Chinese market is positive in the same period. Chuan CAI securities analyst zhou yu said if Japanese and south Korean manufacturers hit production capacity, semiconductor storage prices have a rising trend, semiconductor materials are expected to accelerate the localization of semiconductor materials, investors can focus on semiconductor storage, materials, panels and other areas of benefit.

Zhang also believes that setting up suppliers in different regions of the world may be a delaying tactic for Chinese companies, but the fundamental approach still requires our country to make strategic investment in the whole semiconductor industry. "China must be able to design and manufacture key chips on its own, and manufacturing companies must not be too reliant on human labor, they must be highly automated, and they must train people in microelectronics seriously, not as extensively as before. But these are not short-term solutions, requiring strategic investments at the national level. "The semiconductor industry is very expensive, but it cannot rely on imports. It needs to take a long view." Zhang told the international financial news.

But in the automotive sector, Mr. Min said, even if it wasn't the current outbreak, many domestic auto parts makers have been playing catch-up with Japan. But it takes a long time to change the design, to change the process, to shift capacity.

Zhong also believes that at present in the automotive supply chain, it is still difficult to replace imports with domestic production, because foreign parts from the quality, technical content, reliability and other aspects have been thoroughly tested, and China is a rising star. At the same time, globalization involves many companies and requires decisions from companies all over the world.

Foreign economic and trade university, vice President of the international economic research institute ZhuangRui has said, China, South Korea and Japan is the east Asian production networks in the core of The Three Kingdoms, and production chain relation is very close, as a result, among the three countries the only can do is to unite, to production chain partnership through cooperation, through the fta and other institutional framework to reduce barriers to trade and investment barriers, let the market cost reduction, can let enterprise in the face of external shocks have a stronger response capacity.