World’s relentless demand for chips turns deadly in Malaysia

KUALA LUMPUR: Hani 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 clinic, requesting a Covid-19 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 would not 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.

Hani was allegedly one of at least 20 workers at STMicro’s facility in 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 as it 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 health ministry, 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 maximise 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 former law minister Zaid Ibrahim.

“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 government was slow to react to the crisis this year. As Covid-19 infections surged early this year, then prime Minister Muhyiddin Yassin said in a televised address he would not 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. 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 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 specialises 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 honour 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 did not have to die.

Hani was born in Bukit Gambir, some 25km from Muar. In 1981, he turned three and Dr 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 5.3ha 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 in 1998 and his life soon ended up revolving around the company.

It was at the factory that he met Nancy, a contract worker from Indonesia who was working on the machine next to his. While he was a man of few words, she was not 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 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 would 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 children 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, he bought the family a home for RM35,000.

With his success, Hani began looking out for those less fortunate in his community. He led prayers at the neighbourhood surau. When Covid-19 arrived, he organised a programme 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-19 cases hit Malaysia on Jan 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 did not last. Subsequent waves of Covid-19 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 after that 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-19 surge, an acute shortage of chips was setting off alarm bells in the upper echelons of government in the US, Japan and Europe. The wait times for chips reached a record 18 weeks. President Joe Biden suggested the US would spend US$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 the health ministry reported daily Covid-19 infections of more than 9,000 in early July. Some 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 pm to 7am, 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-19, but they were not very rigorous earlier this year, according to another worker at the factory who asked not to be identified for fear of retaliation. The worker alleged that the company, for example, just took workers’ temperatures as they entered rather than testing them, and did not 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 workers had 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 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.

The day Hani died, 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 organisation 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 emphasises putting people first and protecting everyone’s life,” Kan Matsuzaki, electronics director of IndustriALL, said in the letter.

That day, the international trade and industry ministry ordered a full shutdown of the plant until Aug 4.

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 then, 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 international trade and industry minister Azmin Ali, who allowed the plant to keep operating – have robbed her family of its happiness. The ministry did not return requests for comment.

The company initially did not 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 RM3,425 plus death allowance of RM5,000 and life insurance payout of RM45,000.

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.

Chery made US$5.7 million in total compensation in 2020, or about US$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,” it said.

While 20 deaths may not seem a lot, politicians and corporate executives need to recognise the pain behind such statistics to understand how Covid-19 devastated families and decimated communities, said Zaid.

“The tales of the human tragedies are rarely told, and unless they are explained, we cannot learn from our mistakes. 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 Hani’s 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 have made some soup and veggies to celebrate with their children at home, as they usually did on special occasions.

“It would have been a day filled with happiness,” she said. — Free Malaysia Today