The World’s Relentless Demand for Chips Turns Deadly in Malaysia
(Bloomberg) -- Hani Bin Sha’ari spent more than two decades rising through the ranks at STMicroelectronics NV’s facility in Malaysia. He prided himself on working hard to provide for his wife and four children. So when the chip plant remained open through a spike in Covid-19 infections this year, he kept doing his job.
Then one July morning, the 43-year-old woke up with a fever. His wife Nancy took him to a local clinic, requesting a coronavirus test because of infections at the plant. The results came back positive. Hani was soon quarantined in a hospital. He lost so much weight he started avoiding video calls so he wouldn’t alarm his family. When the couple spoke by phone later, Hani was out of breath and she urged him to rest. It was their last conversation.
“My four-year-old son keeps asking, ‘Where is ayah? Where is ayah?’” Nancy, 41, said in an interview, using a Malay word for dad.
Hani was one of at least 20 workers at STMicro’s facility in the Malaysian district of Muar who died from Covid-19 after the delta variant raged through the country this year. The company kept its chip assembly and testing plant running while the virus was killing workers, as the company raced to meet surging demand from automakers and other customers. Authorities in Malaysia, like in many other countries, were concerned about keeping their economy on track during the pandemic and they granted chipmakers exemptions while much of the country locked down.
“I’m really upset because if ST shut down the plant when people were getting infected in June, I don’t think my husband would have died,” said Nancy.
While Covid-19 killed millions of people around the globe, deaths at the Muar facility were substantially higher than averages in the rest of the country and the world. One in 1,100 people in Malaysia died from the virus since the start of the pandemic, according to the country’s Ministry of Health, while it was at least one in 210 at the plant, according to Bloomberg News reporting. STMicro declined to comment on the specific number of workers who died at the Muar location.
“Since the beginning of the pandemic in January 2020, ST’s actions and strategy have been driven first and utmost by the will to maximize the prevention of infection and supporting our employees and their families,” the company said in a statement to Bloomberg News. “To do so, the company deployed a broad range of measures in close collaboration with the relevant public health authorities in every country it operates, and also relied on expert third-party guidance.”
Before this year, no one worried too much about the global supply chain, beyond specialists in the field. The role of developing nations like Malaysia or the Philippines warranted little attention. But the coronavirus outbreak has been a wake-up call for chief executives, prime ministers and consumers around the world, as shortages disrupted production of everything from iPhones and F-150 pickups to Nike sneakers.
The tragedy in Muar shows the little-understood human cost of keeping supply chains running in a pandemic. While politicians in Washington and Paris urge suppliers to step up production of semiconductors and government officials in countries like Malaysia give special exemptions to powerful corporations, employees like Hani put their lives at risk.
“The duty of the government is to look after the workers’ interest more than the country’s or the companies’ interest,” said Zaid Ibrahim, a former law minister in Malaysia. “Of the three — the government, companies and workers — the most vulnerable are the workers. I wish we could have avoided these tragedies.”
Malaysia is a case study in the conflict between people and profit. The government spent decades attracting foreign investment and diversifying its economy beyond rubber and tin. The country now accounts for 13% of the world’s chip testing and packaging, a key step in producing the semiconductors that go into automobiles, smartphones and other devices. Some 575,000 people were employed in the electrical and electronics industry in 2020, working with global chipmakers such as STMicro, Infineon Technologies AG, Intel Corp. and Renesas Electronics Corp.
The country’s government was slow to react to the crisis this year. As Covid infections surged early this year, then-Prime Minister Muhyiddin Yassin said in a televised address he wouldn’t impose a full lockdown — even though the health ministry had said that would be the best way to stop the virus — because such a step would have negative repercussions for the economy.
Then the delta variant sent infections to a record of more than 20,000 cases a day over the summer. The administration scrambled to put more restrictions in place. But it was too late. Deaths spiked. Battered by public anger over the government’s handling of the virus and political infighting, Muhyiddin and his entire cabinet resigned in August.
“In Malaysia, where the electronics industry is such a big economic source for the country, it’s a tricky balance,” said Peter Hanbury, a partner at Bain & Co. in San Francisco, who specializes in the semiconductor supply chain. “It gets pretty challenging for folks to make a call” between shutting down a factory or keeping it open.
Companies like STMicro had every incentive to keep operating. The French-Italian chipmaker has to answer to customers like Apple Inc., Tesla Inc. and tier one auto components companies such as Continental AG and Robert Bosch GmbH — all of which got caught in the supply chain squeeze.
STMicro, run by Chief Executive Officer Jean-Marc Chery, faced extra pressures this year from politicians around the world who grew alarmed that shortages were shutting down auto plants and other factories. And of course, staying open benefits the company financially. The day Hani died, STMicro reported robust financial results that sent its stock to a record high.
The families of the people who died in Muar have avoided talking publicly about their tragedy. Nancy decided to speak out to honor the memory of her husband: She sees Hani as a good man who was caught between powerful forces of government and corporations, a man who didn’t have to die.
The city of Muar sits on the west coast of the Malay peninsula about halfway between the capital of Kuala Lumpur to the north and Singapore to the south. Hani Bin Sha’ari was born about 25 kilometers away in Bukit Gambir, the son of a rice farmer and a homemaker. Hani — whose name translates simply to Hani, son of Sha’ari — was the fourth of nine children.
In 1981, Hani turned three and Mahathir Mohamad began what would become a 22-year run as prime minister. The politician’s landmark achievement was an economic plan aimed at changing Malaysia from an agricultural country to an industrial one. Foreign direct investments from the likes of Intel, Infineon Technologies and STMicro helped fuel rapid economic growth in the 1990s just as Hani was finishing school. Gross domestic product growth averaged 9.2% from 1990 to 1997, prior to the Asian financial turmoil in 1998. STMicro was one of the more prestigious employers in town for a young man like Hani. The company set up operations there in 1974 and now has about 4,200 workers and a 5.3-hectare site.
Hani applied for a job at STMicro after getting an electronic engineering certificate from one of the public education institutions the government set up to train people in the field of engineering. He started as a trainee at STMicro in 1998 and his life soon ended up revolving around the company.
It was at the factory that he met Nancy, a talkative contract worker from Indonesia who was working on the machine next to his. While he was a man of few words, she wasn’t afraid to speak her mind. On their first date in December 2000, she hopped on Hani’s motorbike and they went to the beach. They strolled along the Malacca Strait and watched the sunset. When Nancy’s two-year contract ended and she returned to Indonesia, she suggested they tie the knot rather than bothering with a long-distance relationship.
“Okay!” he replied with a big smile.
Together, they built a happy life. After they moved into a single rented room, with nothing but a bed and cabinet, Hani promised he’d work hard to buy them their own place one day. Their first child was born a couple of years into their marriage, followed by three more. Nancy focused on raising the kids and managing their finances, while Hani spent long hours at STMicro. She resisted letting the family get a television until two years ago, when STMicro gave Hani one as a gift for his 20-year anniversary.
Hani worked his way up at the chipmaker, eventually becoming a chief technician. In 2006, Hani bought the family a home for 35,000 ringgit or about $8,300.
With his success, Hani began looking out for those less fortunate in his community. He led prayers at the neighborhood surau, a Muslim worship hall. When Covid arrived, he organized a program to provide free food for people who had lost their jobs or needed help feeding their families. He donated his blood regularly — 35 times in all.
The first Covid cases hit Malaysia on January 25, 2020, after three Chinese nationals from Wuhan entered the country. The initial infection at STMicro’s plant was identified in March, the same month as the first deaths from the virus in the country.
The government quickly imposed nationwide restrictions, ordering businesses to halt operations. By July 1, 2020, local transmissions fell to zero. But the success didn’t last. Subsequent waves of Covid pushed daily infections into the thousands in January and again in May.
This time, the Malaysia Semiconductor Industry Association, a powerful group of about 140 international and local companies, repeatedly urged the government to allow semiconductor and electronics factories to keep operating during the pandemic. When the government imposed a two-week “total lockdown” from June 1, it excluded essential businesses — including the technology giants.
The association “is grateful that the Malaysian government has taken our inputs into account and decided not to have a total lockdown and allowed 60% of the workforce to work,” the trade group said in a statement on May 27.
The country’s factories do serve a critical step in the global supply chain. The most sophisticated semiconductors are made in countries like Taiwan and South Korea. Then they are shipped to Malaysia for final testing and assembly into the components customers can use. Only afterward can they be integrated into final products like automobiles for features such as steering, brakes and infotainment systems.
And just as Malaysia was contending with its second Covid surge, an acute shortage of chips was setting off alarm bells in the upper echelons of government in the U.S., Japan and Europe. The wait times for chips reached a record 18 weeks. President Joe Biden suggested the U.S. would spend $50 billion on domestic semiconductor capacity. On June 30, Ford Motor Co. said it would halt production for two weeks at the Michigan factory that just began building its highly anticipated Bronco sport utility vehicle.
The Malaysia Semiconductor Industry Association argued it had to do its part to address the crunch.
“The supply chain of this industry is highly integrated, be it within its own industry or with other industries, locally and worldwide,” the association said on July 7. “The global semiconductor and electronics industry plays a critical role in the global economy.”
STMicro’s plant in Muar stayed open as Malaysia’s health ministry reported daily Covid infections of more than 9,000 in early July.
Some STMicro employees were able to work from home. But workers on the production floor, like Hani, had to go in. In fact, Hani worked overtime so the company could meet customer demand, 12 hours a day for four straight days. Then he would take two days off, before going into the night shift, working from 7 p.m. to 7 a.m., for four consecutive days. Only when the company detected confirmed cases would it partially close an area for disinfection.
STMicro had procedures in place for Covid, but they weren’t very rigorous earlier this year, according to another worker at the factory who asked not to be identified for fear of retaliation. The company, for example, just took workers’ temperatures as they entered rather than testing them, and didn’t have advanced tracking systems to determine which workers were in close contact with infected colleagues.
On July 9, the health ministry confirmed the existence of a cluster called “Persiaran Agas” — named after the address of STMicro’s Muar facility with 18 positive cases during the first round of screening. By then, at least two STMicro workers had already died from Covid-19. Three days later, Hani came home with a headache.
STMicro declined to discuss specific safety measures in use at that time. The company said that the configuration of the Muar site, with seven different buildings, enabled it to close certain buildings as required during the outbreak “under the guidance, approval and control of the Malaysian health authorities.”
The death rate at the facility appears to be higher than at similar companies in Malaysia. At Unisem Bhd., a domestic semiconductor firm, three of 3,500 employees died — roughly matching the national rate — according to Chairman John Chia.
During his many years working at the Muar facility, Hani developed a predictable routine. When he was on the day shift, he got up at 5 a.m., showered and performed a tahajjud or night prayer. Nancy would get up with him, working in the kitchen to stir-fry rice for his favorite breakfast, the hearty nasi goreng.
“Jumpa lagi,” he’d say, meaning “see you soon” as he kissed her goodbye. He’d leave home around quarter to six.
His first stop was the nearby surau for morning prayer. After reaching the company’s parking lot, he would eat his breakfast from home inside the car before starting his day.
When Hani came home with a headache on July 12, he figured it was probably because he got caught in the rain. He took some Panadol and went to bed early. By morning, the fever had started.
Meanwhile, a sense of crisis began to grip Malaysia. New Covid infections passed 11,000 a day in mid-July. Struggling families hung white flags outside their homes in an appeal for help and the hashtag #benderaputih — meaning white flag — gained traction online.
Nancy and the children also tested positive for Covid and were quarantined in a different facility. They were planning to have a video call in the evening of July 26. But a doctor called her from the hospital and said Hani had to be intubated immediately. Three days later, the hospital arranged for Nancy to see her husband via a video call as he was unconscious and dying in the intensive care unit. He passed away on July 29.
The day of his death, state politicians called for action to prevent further casualties at STMicro’s factory.
“We are not asking the factory to close for 14 years but only 14 days for the safety of the public,” the president of a non-governmental organization said, according to local media.
In a letter to STMicro, IndustriALL Global Union, a global union federation, called on the company to put workers before company profits. “We urge STM to walk the talk on its sustainability strategy, which emphasizes putting people first and protecting everyone’s life,” Kan Matsuzaki, electronics director of IndustriALL, said in the letter.
That day, the Ministry of International Trade and Industry ordered a full shutdown of the plant until August 4.
The nation of about 32 million people hit a record 21,000 daily cases in August, the highest per capita average in the region. The public grew furious. A new flag movement sprung up — #benderahitam, or black flag, this time — calling for the premier’s resignation. On Aug. 21, Ismail Sabri Yaakob was sworn in as Malaysia’s third prime minister in 18 months.
“There were so many deaths,” said Lim Guan Eng, secretary-general of the opposition Democratic Action Party. “We were in a very dark period.”
By mid-August, about a third of the population was fully vaccinated. The Ministry of International Trade and Industry announced manufacturing companies could bring in 60% their workers depending on the percentage of vaccinated employees.
At a conference in September, STMicro CEO Chery addressed analyst questions about the situation in Malaysia and the prospects for returning to full capacity.
“I feel entitled to speak about Malaysia because this morning, I landed from Malaysia,” he said. “We faced many, many days of total or partial closure, numerous people were under quarantine and, very sadly, some fatalities.”
Chery added that 99% of the workforce in Malaysia had been vaccinated and that the factory has implemented a new system for tracking employees. Workers also now take PCR tests regularly. Procedures have become much more rigorous since the summer, said the worker who asked for anonymity.
The changes in government and corporate policies ultimately came too late for Nancy and Hani. She says that STMicro — as well as Malaysian International Trade and Industry Minister Mohamed Azmin Ali, who allowed the plant to keep operating — have robbed her family of its happiness. The ministry didn’t return requests for comment.
The company initially didn’t provide financial support to some bereaved families, Nancy said, explaining the cases were not necessarily connected to the plant. After she began speaking out, STMicro offered her some compensation: 10 months of his basic salary of 3,425 ringgit ($820) plus death allowance of 5,000 ringgit and life insurance payout of 45,000 ringgit. The total is about $20,000. Her four children will get about $120 a month each until they turn 20.
Some families of workers who died told Nancy they were offered similar payments only after she got hers. STMicro has made the compensation package standard for families of workers who died of Covid-19.
In early October, Nancy wrote to STMicro’s management seeking more compensation; Hani’s monthly basic salary of about $820 until he would turn 60 plus health care for her family. After a month, she contacted the company and was then told her request was rejected.
Chery made $5.7 million in total compensation in 2020, or about $16,000 a day.
STMicro declined to comment on specific compensation offers or on the timing of its decision to provide payments. “The company is supporting the families of our colleagues who passed away due to COVID-19 with a comprehensive financial package which includes a number of things which are standard across the company globally, as well as specific measures taking into account the situation of our employees in Muar, notably support for the education of the children of those families affected,” the company said.
While 20 deaths may not seem a lot, politicians and corporate executives need to recognize the pain behind such statistics to understand how Covid devastated families and decimated communities, said Zaid, the former Malaysian law minister.
“The tales of the human tragedies are rarely told, and unless they are explained, we cannot learn from our mistakes,” Zaid said. “This is a lesson for the future.”
Nancy has struggled to recover from Covid-19 herself. She grapples with grief and depression, seeking solace by visiting his grave and surau. One of his last wishes was for Nancy to stock enough food there for the poor.
The couple’s 20th wedding anniversary was Oct. 3. Nancy said Hani would have bought some fried chicken from KFC and she would’ve made some soup and veggies to celebrate with their kids at home, as they usually did on special occasions.
“It would have been a day filled with happiness,” she said.
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