Almost two-thirds of SMIC's Shanghai employees are living at work

Closed-loop factories are all the rage as COVID rages on, despite China’s insistence that the virus stop

Over 60 percent of Semiconductor Manufacturing International Corporation's (SMIC) Shanghai staff are living around the factory campus, in accordance with the ongoing city-wide COVID lockdown, the Chinese semiconductor foundry confirmed this week.

The workers in the eastern Pudong district's Zhangjiang complex, an area known as the epicenter of Shanghai's chip industry, are operating in a "closed loop" system, meaning they have no contact with the outside world as they live and eat at (or at least very near) their place of employment.

The company said it had resumed full production after a brief period of being partially affected by lockdowns in mid-April.

According to reports decribing the "closed-loop management of the Zhangjiang plant and two living parks", the chipmaker implemented the system on March 18, and more workers re-entered the closed loop after being given the green light from the government.

The Shanghai administration issued a list of 666 enterprises to resume production if they managed COVID prevention strategies correctly. As of last week, 70 percent of those on the "white list" had resumed some operations, including Science Applications International Corporation (SAIC) and Tesla. A third of the companies on the list were auto manufacturers and suppliers.

The 25-million-plus residents of Shanghai have been under strict lockdown since the week of March 28th.

Residents, including those who work in logistics and manufacturing such as delivery drivers and factory workers, are confined to their homes, with many reporting difficulty getting food, medicine, and other essentials. The government has delivered vegetable boxes to registered residents, though many have said the supplies are not enough and they are still hungry.

The tech-savvy among the populace have turned to e-commerce to secure supplies and negotiate contactless trades among neighbours.

Presumably, those working in SMIC's closed-loop system are not expected to source their own food, although details over SMIC's dining arrangements were not released and SMIC had not responded to requests for comment by the time of publication.

But the closed-loop system is not a new concept. Factories in Vietnam had on-site arrangements last year as vaccine rates hovered around four percent and outbreaks of COVID's Delta strain hit the SouthEast Asian country.

The closed-loop factory systems in Vietnam lasted around a month.

Meanwhile, Shanghai's lockdown and subsequent closed-loop factories have no predicted end in sight.

Beyond bulk neighborhood buys and closed-loop factories, trucks have had difficulty getting in and out of Shanghai, thereby complicating all logistics and greatly exacerbating an already choked supply chain. Factories are hindered from making components or systems, as well as receiving and delivering parts to business partners which thereby complicates shipping finished products.

According to market intelligence firm TrendForce, electronics makers are predicted to have difficulty securing processors, battery modules, panel materials and certain multi-layer ceramic capacitors (MLCCs) going into things like servers and vehicles.

Meanwhile, the clock is ticking on China's US sanction-inspired 2035 self-sufficiency goals. It was already doubtful that the Middle Kingdom would meet its goal of making 70 percent of its own semiconductors domestically by 2025.

SMIC is an important part of achieving those chip goals as it was the fastest growing wafer foundry last year. The semiconductor manufacturer made $5.4 billion in revenue in 2021, an increase of 39 percent year-on-year. ®

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