Uncertainties Remain within South Korean Industries Due to the New Coronavirus Situation

Feb 10, 2020

As the recent coronavirus situation does not show any sign of settling down, it is expected that uncertainties within South Korean industries will continue for another week or two.
Although few companies such as Hyundai and Kia are planning on restarting parts of their factories under the premise that they will set up strong preventive systems, uncertainties still remain due to the fact that the situation can suddenly change anytime.
As the number of deaths within China surpassed 800 people, Chinese Government has either extended closure of factories and plants or it has allowed opening under strict conditions. Zhejiang Province has been imposed with a lockdown just like Hubei while other local governments are also enforcing strong measures. Companies that are looking to restart their factories need to go through on-site inspection of their preventive systems by local governments before they are given a decision.
After analyzing collected news on the coronavirus situation by the Electronic Times, it will be difficult operations of factories and plants in China to be normal even after the 10th when Chinese New Year holiday is over. Although few major companies are looking to restart their factories, it is likely that it will take some more time before their factories to be on normal operations. As a result, it will be inevitable that South Korean companies will be dealt with major blows such as production setback.
Although South Korean companies are expecting to restart their factories since the 10th, it is expected that the current situation will remain for some time as the new coronavirus continues to spread and does not seem contained.
As Zhejiang Province has enforced a lockdown on its province, factories within the province have extended period of closure until the 15th of March.
Even if the situation shows signs of improvement, it will be impossible for companies that have factories in Zhejiang Province to restart their factories before March. Chinese authorities are doing everything they can such as postponing opening days of elementary schools, middle schools, and high schools in order to prevent the spread of the virus. While Heilongjiang Province has postponed opening days at least until the 1st of March, Jiangxi Province, Anhui Province, and Shanghai have postponed opening days at least until the 17th of this month. As of the noon of the 9th (Korea time), the number of deaths from the new coronavirus was 813 already surpassing the number of deaths from SARS which was 773.
Even if people go back to their work on the 10th, it will be difficult for factories to be on normal operations for a while.
Local governments in China are inspecting preventive systems of factories whenever factories with more than 300 employees request for re-operation and make decisions based on their inspections. Not only the inspection process takes at least 3 to 4 days, it is likely that normal operation will be possible starting from next week at least considering the fact that people tend to remain home for few more days even after Chinese New Year holiday period.
“Although we can go back to work by making a request for re-operation, it is not easy for us to restart factories as the standards for re-operation are very strict.” said a representative for a South Korean company that has an original equipment manufacturer (OEM) factory in China. “Because policies for re-operation are different between local governments, we are checking all of them one by one.”

Hyundai Motor Company’s factory in Ulsan <Hyundai Motor Company’s factory in Ulsan>

While South Korean companies are obeying guidelines by local governments, they are taking even stronger measures such as setting up strongest preventive systems in order to restart their factories. Hyundai and Kia are doing everything they can to persuade Shandong Government so that they can resume production of wiring harness that is the biggest pending issue for them at the moment. By working together with Ministry of Trade, Industry and Energy, they were able to start partial operations of 28 automotive parts factories in Shandong Province starting from the last weekend.
Major South Korean automotive parts makers have resumed production of wiring harness, which had not been manufactured for a while, in order to help South Korean automotive manufacturers restart their production lines. “We are currently manufacturing wiring harness by mobilizing every available hand.” said a representative for an automotive parts maker. “We even have our employees come on weekends in order to operate our production lines.”
While Samsung Electronics, which has dryer, washing machine, and laptop production factories in Suzhou, is planning to restart their plants on the 10th, it is paying careful attention to the situation in Suzhou as the situation can change any moment.
LG Electronics, which has factories different parts of China such as Nanjing (washing machine, laptop, monitor, automotive parts), Tianjin (air conditioner), and Taizhou (refrigerator), is also analyzing situations in these cities in order to restart its factories on the 10th. “We are only going to allow employees who have stayed at their current corporate bodies for at least two weeks to go back to work.” said a representative for LG Electronics. “Any person who is showing symptoms will be prohibited from entering our workplace and we have set up preventive measures such as masks and thermometers.”
As inventories start to dry up, South Korean industries will be dealt with a major blow if factories in China continue to be shut down for a longer period of time.
Electronics and automotive industries that highly depend on China for wiring harness, motor parts for air purifier and water purifier, and PCs will be heavily affected if the situation does not settle down any time soon. South Korea’s semiconductor industry, which has not stopped operating its plants, and the display industry that is planning to restart its plants have remained on their toes for any unexpected situation.
“Although our industries need to work on lowering their level of dependence on China, it is not easy for them to replace their Chinese partners that have been working with them for a long period of time overnight.” said a representative for the financial world. “We have to observe the situation for at least a week or two more.”
Staff Reporter Kim, Yongjoo | kyj@etnews.com & Staff Reporter Choi, Jaepil | jpchoi@etnews.com

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