Behind the scenes of this past year's Malaysian microchip crisis

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 last year, he kept doing his job.

Then one morning in July, 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 as not to 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.

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 last year. That spike in cases in Malaysia crimped the auto industry's microchip pipeline last summer, just as automakers in Asia, North America and Europe had begun to hope they had seen the worst of the 2021 chip shortage.

Authorities in Malaysia, as 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.

STMicro kept its chip assembly and testing plant running as the company raced to meet surging demand from automakers and other customers.

"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.

COVID-19 has killed millions of people around the globe, and the toll continues to climb. In Malaysia, 1 in 1,100 people died from the virus since the start of the pandemic, according to the country's Ministry of Health. But deaths at the Muar chip facility were substantially higher, amounting to 1 in 210, according to Bloomberg News reporting.

STMicro declined to comment on the specific number of workers who have 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, beyond specialists in the field of logistics, there was little public discussion of something as remote as "the global supply chain." Even in industry discussions of supply chains, the role of developing nations such as Malaysia or the Philippines warranted little attention in the big scheme of automaking.

But the coronavirus outbreak delivered a wake-up call for industry executives, political leaders and consumers around the world, as shortages disrupted production of everything from iPhones and Ford 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 urged suppliers to step up production of semiconductors, and government officials in countries such as Malaysia gave special exemptions to powerful corporations, employees such as 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 challenges of last year's chip crisis.

The government spent decades attracting foreign investment and diversifying its economy beyond rubber and tin. Malaysia now accounts for 13 percent of the world's chip testing and packaging, a key step in producing the semiconductors that go into automobiles and other devices. Some 575,000 people were employed in the country's electrical and electronics industry in 2020, working with global chipmakers such as STMicro, Infineon Technologies AG, Intel Corp. and Renesas Electronics Corp.

But like politicians in other nations, Malaysian officials were slow to react to health concerns. As COVID-19 infections surged early last 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 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 increased. 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 such as STMicro had every incentive to keep operating. The French-Italian chipmaker has to answer to customers such as Apple Inc. and Tesla and Tier 1 auto components companies including Continental AG and Robert Bosch GmbH — all of which got caught in the supply chain squeeze.

STMicro CEO Jean-Marc Chery faced extra pressures last year from politicians around the world who grew alarmed that shortages were shutting down auto plants and other factories. And staying open benefits the company financially. The day Hani died, STMicro reported robust financial results that sent its stock to a record high.

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 was the fourth of nine children.

In 1981, Hani turned 3 and Mahathir Mohamad began what would be 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 percent 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 on a 13-acre site.

Hani applied for a job at STMicro after getting an electronics 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.

They built a happy life together. 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, he 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-19 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-19 cases reached 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 that success didn't last. Subsequent waves of COVID-19 pushed daily infections into the thousands last January and again in May.

This time, the Malaysia Semiconductor Industry Association, a 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.

In a statement released on May 27, the trade group said it was "grateful that the Malaysian government has taken our inputs into account and decided not to have a total lockdown and allowed 60 percent of the work force to work."

The country's factories serve a critical step in the global supply chain. The most sophisticated semiconductors are made in countries such as Taiwan and South Korea. They are then shipped to Malaysia for final testing and assembly into components. Only afterward can they be integrated into final products such as automobiles for features such as steering, brakes and infotainment systems.

Just as Malaysia was contending with its second COVID-19 surge, an acute shortage of chips was setting off alarm bells around the industry. The wait times for chips reached a record 18 weeks. 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. President Joe Biden suggested the U.S. would spend $50 billion to expand domestic semiconductor capacity.

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-19 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 Bin Sha'ari, had to go in. In fact, he worked overtime to help the company meet customer demand. He worked 12 hours a day for four straight days, then took two days off, and then worked four consecutive night shifts, from 7 p.m. to 7 a.m.

STMicro had procedures in place for COVID-19, but they weren't very rigorous early last year, according to another worker at the factory who asked not to be identified for fear of retaliation. The company took employees' temperatures as they entered the workplace rather than testing them, and it didn't have advanced tracking systems to determine which workers were in close contact with infected colleagues. Only when the company detected confirmed cases would it partially close an area for disinfection.

On July 9, Malaysia's 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 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."

But the death rate at the facility appears to be higher than at similar companies in Malaysia. At Unisem Bhd., a domestic semiconductor company, three of 3,500 employees died — roughly matching the national rate — according to Chairman John Chia.

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-19 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-19 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 died 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 nongovernmental 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 Aug. 4.

The nation of about 32 million people reached a record 21,000 daily cases that month, 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 country's population was fully vaccinated. The Ministry of International Trade and Industry announced manufacturing companies could bring in 60 percent of their workers, depending on the percentage of vaccinated employees.

At a conference in September, STMicro CEO Chery addressed analysts' 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 percent of the work force in Malaysia had been vaccinated and that the factory had 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 Bin Sha'ari.

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.

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 told her request was rejected.

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.

Zaid, the former Malaysian law minister, said that while 20 deaths may not seem a lot, politicians and corporate executives need to recognize the pain behind such statistics to understand how COVID-19 devastated families and decimated communities.

"The tales of the human tragedies are rarely told, and unless they are explained, we cannot learn from our mistakes," he said. "This is a lesson for the future."