The strongest typhoon in Asia this year made landfall in Vietnam’s northern coast, leaving a trail of destruction behind. As a result of the widespread damage caused by Typhoon Yagi, disruptions to the global semiconductor supply chain are anticipated.
Importance of Vietnam in the Semiconductor Supply Chain
Vietnam is a key player in the global semiconductor supply chain, particularly in the assembly, testing, and packaging of electronic components. As the third-largest Asian exporter of semiconductors to the United States, Vietnam plays a crucial role in supporting the U.S. semiconductor market, which is heavily reliant on a steady supply of these components. In fact, Vietnam is now ranked among the top 10 global exporters of semiconductor devices and integrated circuits, placing 9th in both categories. Impressively, the country commands a substantial market share, contributing around 2% of the total value derived from exports in these sectors, according to data from the Observatory of Economic Complexity (OEC).
In recent years, Vietnam’s importance in the semiconductor sector has grown significantly. In 2023 alone, U.S. chip imports from Vietnam grew by 75%, reaching a remarkable $562 million. This increase highlights the country’s strategic importance in meeting the global demand for semiconductors, particularly as supply chains have faced challenges due to natural disasters.
Major companies like Intel and Samsung have made substantial investments in the country, further solidifying Vietnam’s status as a key link in the supply chain for advanced electronics, including smartphones, laptops, and automotive components.
Typhoon Yagi
The storm made landfall in Vietnams northern coast with devastating force, triggering waves as high as 13 feet tall in coastal provinces. The storm has caused deadly floods and landslides, killed hundreds of people and destroyed power networks and roads.
Click here for information on other typhoons that have caused supply chain disruptions.
Impacts of Typhoon Yagi
Typhoon Yagi caused extensive damage to numerous factories and flooded warehouses in northern Vietnam’s export-focused industrial centers. This has led to plant closures, with many facilities expected to take weeks before fully resuming operations. These disruptions could impact global supply chains, as Vietnam is home to major operations of multinational companies that primarily export their products to the United States, Europe, and other developed nations.
Bruno Jaspaert, head of the DEEP C industrial zones, reported that 20 out of 150 investor plants in the DEEP C zones, which house factories in Haiphong and the neighboring Quang Ninh province, will be out of operation for at least a few weeks.
Power consumption at affected factories is expected to remain one-third below normal for weeks or even months as businesses focus on rebuilding. Components prepared for export were flooded in warehouses further delaying deliveries. In Haiphong, LG Electronics partially resumed operations despite its factory walls being destroyed and a warehouse containing refrigerators and washing machines being flooded.
Strategies for Mitigating Supply Chain Disruptions
Supply chain disruptions are a persistent challenge, often caused by factors such as natural disasters like Typhoon Yagi. To minimize these disruptions, businesses must focus on risk assessment and management. This includes identifying vulnerabilities within the supply chain, assessing their potential impact, and creating plans. A clear understanding of these risks allows companies to allocate resources effectively and protect operations. Diversifying suppliers is also crucial, as relying on multiple sources ensures that the flow of goods can continue even if one supplier is affected. By implementing these strategies, businesses can respond quickly and maintain stability when disruptions, like natural disasters, occur.
Protect Your Supply Chain
At Microchip USA, we are fully prepared to help mitigate supply chain disruptions caused by natural disasters like Typhoon Yagi. As a trusted distributor of electronic components, we have extensive experience in supply chain management and sourcing hard-to-find and obsolete parts. Our expert team, with deep industry knowledge, understands the challenges that supply chain disruptions pose to businesses. By utilizing our vast network, we can source even the most obsolete components, ensuring uninterrupted access to critical parts. Additionally, we offer supply chain support services to manage inventory and maintain smooth operations, even in the wake of natural disasters.
