Power outage at Toshiba NAND plant, analysts weigh impact

December 9, 2010 – A power outage at a Japanese power plant has put a big dent in Toshiba’s NAND flash memory output at its memory plant in Yokkaichi, according to multiple reports.

The problem, traced by Chubu Electric Power Co. as a problem at a substation of a thermal power plant, caused a sudden drop in electrical supply to nearby areas, including Aichi, Mie, and Gifu prefectures — and among the sites hit was Toshiba’s NAND plant, where the sudden power plummet exceeded the capabilities of backup systems and some equipment had to be taken offline. The Nikkei daily reports the problem began on Wednesday early morning in Japan, and multiple reports suggest normal operations won’t be restored until Friday.

The company apparently is estimating that the outage could slash its January-February NAND shipments by as much as 20% — that could translate into 8% of total global shipments during the period (calculating Toshiba at 40% market share), according to iSuppli analyst Akira Minamikawa, cited by the Wall Street Journal. Since the post-holiday-season, first-quarter period is usually quiet in terms of device making & consumption, the impact of the cuts may not be too bad …assuming Toshiba gets the plant back up and running quickly.

In the short-term, though, uncertainty about when things will return to normal is expected to put a spike in NAND flash memory prices, and the timing isn’t great. "If flash memory pricing goes up short term because of these supply shortages then it’s going to make the new tablets being introduced more expensive because all the tablet guys will just pass on that pricing," noted ThinkEquity’s Krishna Shankar, quoted by Reuters.

The timing is particularly bad for key NAND flash user Apple, which gobbles up 25% of the planet’s NAND memory for its devices. "We’ve heard Apple’s demand for flash in 2011 is going be up 100% over 2010 so this is a bad time to have a shortage," according to Stifel Nicolaus analyst Kevin Cassidy, cited in the Reuters report. But Gleacher & Co.’s Brian Marshall thinks Apple won’t flinch since it also sources NAND from Samsung as well as Hynix and possibly the Intel-Micron IM Flash joint venture. (Fool.com’s take: Investors see a temporary but golden opportunity for Micron.


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