Internet & Tech

Poor optics

Wuhan’s top tech firms downplay virus impact


Optic cables at a factory in Wuhan

Xi Jinping has visited Wuhan twice since taking over as China’s paramount leader. One of his stopovers on both trips was a vast district in the city known as Optics Valley. In 2013 he affirmed the elemental importance of science and technology to China’s prosperity, which paved the way for the setting-up in Optics Valley of Yangtze Memory Technologies, a Rmb24 billion ($3.43 billion) chip plant. Optics Valley was also the place where Xi declared China’s ambitions for technological self-sufficiency two years ago – a move that followed a US ban on the supply of chips and other components to telecom equipment firm ZTE (see WiC406).

The capital city of Hubei province actually has three development zones but Optics Valley is the one primarily tasked with incubating advanced technologies including robotics, semiconductor manufacturing, 3D printing and biologic medicine. In the last few years, it has been Wuhan’s biggest draw for investment, thanks to companies such as Schneider Electric, Huawei, Foxconn, Xiaomi and Lenovo. With the zone’s GDP growth at 10.8% in the first half of 2019 – well ahead of the city’s overall number – Optics Valley is viewed by local officials as Wuhan’s best shot of being elevated to tier-one city status (alongside the likes of Shanghai and Shenzhen).

So when the coronavirus struck Wuhan, some of the biggest companies based in the Valley scrambled to downplay the impact. Both Yangtze Memory Technologies, a manufacturer of 3D NAND memory chips, and Xinxin Semiconductor Manufacturing, which produces NOR flash and CIS chips, claimed that their factories were still running and that their products were still being shipped through special channels, thanks to their strategic importance to China’s chipmaking ambitions.

Yangtze Optical Fibre and Cable, which produces a fifth of the world’s wires for carrying data, stressed that its factories could also continue to run too, thanks to a high degree of automation in its production.

Huagong Tech, a supplier of optical modules to Huawei for 5G networks, also told investors that the coronavirus would cause at most a seven-day delay in product delivery, and that its inventory in Shenzhen would ensure supply for a month.

Some of these firms are reportedly invoking their special status at policy level to keep their factories open. Certainly, more automated production lines will be paying a major dividend too in negating the need for larger numbers of workers. On the other hand, parts and materials inventories will surely be coming under strain, with Wuhan’s railways and river ports still out of action.

Other companies aren’t reporting business as usual. Panel manufacturers such as BOE, Tianma and TCL’s China Star Optoelectronics Technology, which have five factories between them in Wuhan, are all feeling the pinch, according to David Hsieh, senior director at IHS Markit. “These factories are facing shortages of both labour and key components as a result of mandates designed to limit the contagion’s spread. In the face of these challenges, top display suppliers in China have informed our experts that a near-term production decline is unavoidable,” Hsieh noted, forecasting that capacity utilisation for liquid crystal display fabs across the country could fall by more than a fifth in February.

Other companies in the Optics Valley are experiencing similar disruption, with some considering shifting their production elsewhere. “Assuming the epidemic is not widely spread outside of Wuhan, the supply chain of the optical communications industry can be partially moved to Shenzhen. Should the epidemic worsen, more customers will switch to Taiwan for procurement,” predicted Taiwan’s United Evening News.

Launched in 2001, Optics Valley was originally an optoelectronics research base linked to Huazhong University of Science and Technology, an institution also known for educating many of Huawei’s engineers. Two decades of aggressive investments and generous policies to lure tech talent have transformed the zone into a more diverse industrial hub. Among the country’s 169 high-tech zones, it is ranked fourth in terms of competitiveness and innovative capability, according to Technology Daily, a state media source.

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