Rolling Blackouts Impeding Japanese Chip Makers Trying to Recover
Sparing few superlatives, an IHS iSuppli analyst on Friday declared that the record quake and tsunami that struck northern Japan March 11 was “the most the significant event to hit the electronic supply chain in the history of the semiconductor industry.” Citing previous quakes that struck semiconductor production centers the past several decades, “none were as broad in scope or impacted as many suppliers as this disaster has,” Dale Ford, senior vice president of market intelligence at IHS iSuppli, said on a webcast.
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Semiconductor fab plants are going through different stages of recovery, Ford said. The impact extends beyond facilities damaged in the quake to include undamaged plants that can’t ramp up to partial or full production because of rolling brownouts initiated by the Tokyo Electric Power Company (TEPCO). Rolling blackouts are “one of the most problematic issues” companies are working with in restoring production, Ford said.
Companies that were closest to the quake’s epicenter and suffered structural damage are facing four to six months before shipments can be restored, Ford said. Companies farthest from the epicenter could be back to normal shipments within one to three weeks, he said. But in some cases, production may not return at all. There’s been some discussion about “whether it even makes sense” to return Toshiba’s Iwate facility to production, Ford said. Freescale had already planned to shut down its semiconductor facility, and “this may just accelerate that,” he said. Most plants are expected to be back to full production within three months, he said.
Len Jelinek, director and chief analyst of semiconductor manufacturing for IHS, said the most overwhelming issue facing the supply chain is uninterrupted power. TEPCO is not discriminating between residential or industrial customers, he said, but silicon plants require “clean and uninterrupted power” for more than 24 hours at a time to operate properly. Rolling blackouts could create a “dangerous” situation where “mass flow controllers or other critical devices get stuck in the open position,” he said.
Shin-Etsu, a leading raw silicon supplier with monthly output of 800,000 300mm wafers, is forecast to be at 70 percent production capacity by June, Jelinek said, although competitors are primed to fill in where necessary, leaving only a three- to four-week period of tight supplies. But even if other silicon suppliers can help fill demand, the rolling blackouts, scheduled to continue throughout the year, could impact production. The key to minimal shortages of silicon, Jelinek said, is a “reliable, clean power source."
The impact of the production shortfall will be widespread and not just related to manufacturing, Ford said. One example he cited was the CDMA version of the iPhone4, that has four parts that pass through Japan “one way or another.” If there’s a limitation of supply of any element of the phone, “it’s going to create a headache to produce the product,” he said. Toshiba’s ability to provide iPhone4 memory chips has been affected “so clearly, alternate sources of supply are going to have to be explored,” he said. The phone’s Wi-Fi/FM chip is delivered by Broadcom and then manufactured in Taiwan, but it’s packaged into a module by Murata in Japan, he noted. Transportation by port, rail and roadway has been affected, he said.
Renesas, which supplies 44 percent of the semiconductors for the worldwide automotive market, also supplies memory, logic and analog parts to Nokia, Sony/Ericsson, Apple, RIM, Samsung, Archos and Motorola for mobile handsets and tablets, Ford noted. General-purpose parts will be easier to replace but power amplifiers, RF transceivers or image processors are going to be “much more difficult to replace quickly.” Renesas also supplies chips for desktop PCs, laptops, set-top boxes, game consoles, TVs, printers, accessories and speaker systems for companies including Apple, HP, Asus, Lenovo, Sony, Toshiba, Samsung, Sharp, DirecTV, iHome, Microsoft and Nintendo. With the “wide-ranging damage to Renesas production facilities, some of these products have to find alternative sources of supply today,” he said.
A similar situation is playing out with Fujitsu-supplied memory, logic and analog components that are more application-specific for products including mobile handsets, notebook and netbook PCs, TVs and game consoles, Ford said. Damage to ON/Sanyo facilities is less problematic in terms of the supply chain because the devices are more general-purpose and alternate providers will be easier to find, he said.
CE categories expected to incur “moderate” production disruptions from the quake are high-end digital cameras, gaming consoles and handhelds and TVs, according to IHS. High-end DSLRs from Nikon and Canon will be impacted, Ford said, but most consumer cameras are manufactured outside Japan and won’t feel an effect. Although Nintendo “is optimistic right now,” Ford said the company’s supply of 3D displays for its 3DS may be impacted. Nintendo is sourcing the displays from Sharp. Sony PS3 production could be affected by supplies of Blu-ray optical pick-ups, Ford said. The pick-ups are made in Sony factories located in the hardest hit Fukushima and Miyagi prefectures. Most TV production is off-shore or outside the damage zone in Japan, but there could be problems with rolling blackouts and “certain raw materials” that could affect production, Ford said.