A fire at a giant Chinese factory making almost one sixth of the world’s supply of a key high-tech component shows how vulnerable global manufacturing chains can be to an unexpected event, analysts say.
The vast SK Hynix facility in Wuxi city produces dynamic random access memory (DRAM) chips, used to store data in personal computers and mobile devices such as smartphones and tablets.
The South Korean firm is the world’s second largest manufacturer of DRAM chips, and says it has a 30 per cent market share, with the factory in eastern China accounting for half its output.
Foreign firms have flocked to China, the workshop of the world, to take advantage of cheap labour, good infrastructure and accommodative local governments.
Economies of scale gained through massive factory complexes help lower costs, but also bring with them risks should a company rely on a limited number of plants.
The scale of production now means that a fire or strike taking one factory out of action can reverberate around the world.