A 'Production Cliff' Due to Extended Shutdowns
The shutdowns of Korean companies’ overseas factories, which started in March, have been extended to late April or May, causing them a “production cliff.”
Samsung Electronics has delayed the restart of its smartphone and home appliance factories in India, washer factory in the United States, and home appliance factory in Poland by two to three weeks. They were originally scheduled to resume operation in mid-April.
LG Electronics has also extended the shutdown of its Indian and Brazilian factories producing TVs, smartphones and home appliances by two weeks.
Hyosung TNC and Hyosung Heavy Industries, which ceased operations of their plants in India at the end of March, were planning to resume operations in mid-April, but postponed the time to restart them to early May as the Indian government extended its COVID-19 lockdown to May 3.
Even companies that avoided plant shutdowns in March are suffering production disruptions this month. LG Innotek has stopped operating its Mexican factory that produces automotive parts from April 9 to 30. Winia Daewoo's plant in Mexico which produces washing machines, refrigerators and microwave ovens is also virtually closed, with only a minimal number of lines in operation.
The auto industry is facing a worse situation. Downtime is spreading not only to overseas bases, but also to domestic plants. Hyundai Motor's Alabama plant shutdown period was extended to May 1 (local time) and the resumption of operations in Turkey and Brazil's production plants were pushed back to the end of April. Kia Motors has also delayed restarting operations in the United States and Mexico to after April 24.
In Korea, Hyundai Motor will lock down Ulsan 5 Plant Line 2 (Tucson production line) until April 17, and Kia Motors is considering whether to close three factories — Sohari 1 and 2 Factories in Gwangmyung near Seoul and Gwangju 2 Factory — for a week from April 23.
Major overseas factories operated by Korean companies will stop for nearly two months, leading to a production cliff.
Moreover, not only large-sized consumer electronics stores such as North America's Best Buy and Europe’s Media Markt, but also small and medium-sized retailers have shortened their business hours or shuttered their shops since last month, and sales and consumption activities have been all stopped. Although it is already mid-April, the COVID-19 crisis is still worsening around the world, and governments in many countries are likely to maintain factory and distribution lockdowns throughout the second quarter. "It is a big problem that there is no distribution channel to sell even if production plants are immediately restarted," an industry insider said.