With China focused on an intense, sometimes brick-by-brick, search for survivors after Monday's (May 12) devastating earthquake, the government is for now deferring efforts to repair damaged infrastructure. The understandable decision could end up limiting the ability of businesses to resume normal manufacturing operations.
While most electronic manufacturers in China's Sichuan province at the epicenter of the quake thankfully suffered limited damage to buildings and few employee injuries, observers said plants located in the Chengdu region might not operate at full capacity for some time--at least until the government turns its attention to damaged infrastructure.
The massive earthquake, which registered 7.9 on the Richter scale and reportedly could result in the deaths of more than 50,000 people, left hundreds of thousands homeless, leveled buildings across a vast swath of the country, crippled roads and disabled utilities, including water, electricity and communications.
"There is some distance from the epicenter of the earthquake to Chengdu and the buildings, factories and equipment were not damaged," said Kevin Wang, an analyst and senior manager of China services with iSuppli Corp. "They should recover production very soon, but electricity and water supply should be very tight, so the plants will not run at full capacity. Also transportation is not good there."
The provincial capital of Chengdu is a major Chinese economic center, transportation and communications hub. Over the last ten years, the region has tried with moderate success to attract electronics and other high-tech companies, and boasts among its early successes international companies like Alcatel, IBM, Intel, Nokia, Microsoft and Nokia.
Intel Corp.'s assembly and test facility in Chengdu, for example, represents one of two major investments by the world's biggest semiconductor company in China. The Intel deal was a sign to local government officials of the region's ability to attract global high-tech manufacturers.
The killer quake, dubbed the "Wenchuan event" by locals because its epicenter was located in Wenchuan region more than 100 kilometers from Chengdu, was felt throughout the western province and hundreds of miles beyond. However, damage to technology buildings in Chengdu was blunted by the distance from the earthquake's epicenter.
Major electronic companies affected by the earthquake said they expect limited impact on their operations after the quake, although most initially sent employees home and closed affected facilities as a safety precaution. Intel's test and assembly plant in Chengdu employs about 2,000 workers. The company evacuated the site following the earthquake, according to a company spokesman.
Intel's Chengdu plant, located just outside the city, accounts for about 20 percent of its microprocessor and chip set production. Other sites in Malaysia, the Philippines, Costa Rica and Shanghai, China, account for the remaining 80 percent.
The company might have to move some production to other locations if it is unable to immediately resume full production at the Chengdu site, according to Mark Lipacis, an analyst with Morgan Stanley.