Reports: LCD sector takes brunt of Taiwan quake

March 8, 2010 – Last week’s 6.4-magnitude earthquake in Taiwan caused some emergency evacuations and shutdowns among the island’s electronics manufacturing sector, with the biggest impact so far seeming to be in the LCD manufacturing sector.

Dozens of citizens were reported injured as a result of the quake, which hit just after 8am local time about 35 miles northeast of Kaohsiung, followed by another two dozen aftershocks.

Among Taiwan’s chip industry, UMC said the quake did not impact its fabs and offices in Hsinchu; its Fab 12A in the Southern Taiwan Science Park was largely unaffected though some equipment was shut down and some production lines halted, with ~1-1.5 days of production lost (that lost time will be made up by upping output at Fab12i in Singapore). TSMC similarly said the quake "had minimal impact" on the Hsinchu fabs (where it registered magnitude 2), though the quake had a "greater impact" (magnitude 5) at its Tainan site (including an evacuation and shutdown of Fabs 6 and 14) will have caused the equivalent of 1.5 days loss of wafer production. And ASE said it resumed work at 19 facilities after shutting them down "for less than an hour," but is still checking on its packaging equipment and any resulting losses.

It appears that the brunt of the quake’s damage felt by technology manufacturers was felt in Taiwan’s LCD manufacturing community. Both Chi Mei Optoelectronics (fourth-largest global supplier of large LCD panels) and HannStar (7th largest supplier) shut down factories and evacuated workers, losing several days of production. AU Optronics proclaimed little impact, though.

How quickly the local LCD sector gets back on its feet and into resumed levels of production will have a big impact on global supplies for large (>10-in.) LCD panels, notes Sweta Dash, senior director of LCD research at iSuppli. "After a shutdown, it typically takes 12-24 hours before production can be restarted at an LCD manufacturing fab." However, with CMO and HannStar still doing inspections, "if there is damage to the equipment, the shutdown will last for a longer period of time," she writes. An extended production stoppage would cause shortages in both large- and small-size panels for everything from TVs to monitors for desktop PCs and notebooks.

The quake also has halted production of glass in Tainan, too. Avanstrate, which accounts for about 5% of global glass supply, reportedly has suffered "severe damage" on at least one of its five glass melting tanks, Dash notes. Top LCD glass supplier Corning has said all its glass-making operations recovered within hours with no damage and are running normally.

If there is one silver lining, it is this: the current January-February period is shaping up to be a slow period for electronics production and consumption, with shipments typically slowing down (iSuppli had already forecasted a -5.5% decline in large-size LCD shipments in 1Q10 vs. 4Q10), plus slowed business in the retail channels. On the other hand, demand is seen as strong right now due to new display technologies, notes Japan’s Nikkei daily. This means supply is starting to exceed demand and inventories are building up, which would rebalance supplies vs. demand sooner than anticipated. And that means a better pricing environment for suppliers, the paper notes — noting that panel prices for some LCDs have already been firming up or at least holding steady, citing statistics from WitsView Technology.


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