March 23, 2011 — There are over 100 production semiconductor fab lines in 53 locations in Japan, say analyst groups IHS iSuppli and Semico. Over a week after the crippling earthquake and tsunami hit northeastern Japan, analysts consider the next business step, with power outages and aftershocks still disrupting production in areas not directly hit by the crisis.

Semiconductor facilities in Japan that had suspended manufacturing activities after the earthquake cannot truly commence full production again until the aftershocks cease, notes IHS iSuppli. Earthquakes ranging from 4 to 7 on the Richter scale will make it impossible to fully restart these fabs until the earthquakes stop happening with such frequency, IHS iSuppli research indicates. Every time a quake tops 5, the equipment automatically shuts down.

The IHS iSuppli table lists the locations engaged in volume production for semiconductor manufacturing operations in Japan. It does not include R&D fabs. There are only a few semiconductor manufacturing fabs that sustained substantial damage (Texas Instruments has moved about 60% of its Japan-based production to other facilities, Seiko Epson is moving wafer production as well), says Semico, noting that power outages are more widely disrupting production than actual damage from the earthquake/tsunami. Consistent and reliable electric power supply is still a major issue in Japan’s return to normalcy. Semico believes that high tech and other key industrial facilities, as power hogs, will get high priority.

Japan is facing rolling power outages, with frequent electricity supply interruptions in some areas, as several of the country’s nuclear power plants and storage facilities are dangerously damaged. This represents a particular hazard in the production of raw materials for semiconductor manufacturing. Japan’s electrical grid system includes ten utility companies. Semico’s research indicates that extra-high voltage transmission lines link the entire country from Hokkaido in the north to Kyushu in the south. The companies work together to exchange electricity to provide power in the most efficient manner possible in order to cope with emergency situations. These companies also take part in the cooperative development of electric power technology and the sharing of resources. Semico is promoting the use of sand, boric acid, and concrete to encase and seal off the damaged nuclear power facilities, much like Russia’s actions in the Chernobyl disaster.

Japan is the world’s leading producer of the main raw material used in semiconductor manufacturing: silicon. The Japanese earthquake has resulted in the suspension of one-quarter of the global production of silicon wafers used to make semiconductors, reports iSuppli. Manufacturing operations have stopped at Shin-Etsu Chemical Co. Ltd.’s Shirakawa facility. MEMC Electronic Materials Inc. also stopped manufacturing at its Utsunomiya plant. Together, these two facilities account for 25% of the global supply of silicon wafer used to make semiconductors.

Shin-Etsu’s Shirakawa plant is responsible for 20% of global silicon semiconductor wafer supply. The plant is located in Nishigo Village, Fukushima Prefecture Shin-Etsu reported that there has been damage to the plant’s production facilities and equipment. To compensate for the lost manufacturing, Shin-Etsu said it would set up production systems at other facilities. However, the company warned it was unclear how long it would take to restore the damaged facilities and equipment.

MEMC said it evacuated employees and suspended operations at its Utsunomiya plant after the earthquake. The Utsunomiya facility accounts for 5% of worldwide semiconductor wafer supply. MEMC said it expects that shipments from this facility will be delayed during the near term.

The country is also a major provider of chemicals for semiconductor production. Some of these chemicals are hazardous, and power interruptions could lead to dangerous events, such as explosions or the release of poisonous material. In these cases, semiconductor materials facilities facing power interruptions are likely to suspend some operations until a stable power supply can be restored, says IHS iSuppli. Shortages of these materials could cause bottlenecks in the semiconductor production cycle worldwide, adds Semico. Semico believes that in times of shortage companies will find ways to increase efficiencies and improve productivity per wafer. In addition, alternative sources of supply will be found. Also read: Japan earthquake hampering package substrate supplies

In another development for the global electronics supply chain, IHS iSuppli reports that two Japanese companies have stropped production that amounts to 70% of the worldwide supply of the main raw material used to make printed circuit boards (PCBs). The companies, Mitsubishi Gas Chemical Company Inc. and Hitachi Kasei Polymer Co. Ltd., said they will resume production within two weeks of the raw material called copper-clad laminate (CCL).

Many electronic original equipment manufacturers (OEMs) worldwide could be engaging in panic buying of semiconductors and electronic components, spurred by fears of supply disruptions from Japan, says IHS iSuppli. Electronic distributors are reporting a surge in orders from OEM customers, trying to ensure they have sufficient inventory on hand to ride out any interruption in supply.

While the semiconductor supply disruptions are bad, they could have been worse; the recent buildup in global semiconductor inventory may serve to mitigate the impact of reduced supply from Japan. IHS iSuppli in February warned global semiconductor inventory levels had risen to alarmingly high levels, surging to a two–and-a-half year high in the fourth quarter of 2010. Although not completely compensating for supply disruptions from Japan, these excessive inventories may provide some cushion for global semiconductor supply.

While Japan is a major producer of electronic systems, it is a much smaller consumer of such goods, accounting for only about 5.2% of global PC consumption and 5% of worldwide cell phone consumption in 2010, IHS iSuppli research indicates.

Learn more:
Semico: http://www.mapmodel.com/index.php/2011/03/14/the-impact-of-japans-earthquake-on-the-electronics-and-semiconductor-industries/

IHS iSuppli: http://isuppli.com/Semiconductor-Value-Chain/News/Pages/IHS-iSuppli-Issues-Updates-on-Japan-Earthquake.aspx
http://isuppli.com/Semiconductor-Value-Chain/News/Pages/Japan-Earthquake-Suspends-Supply-of-Raw-Material-Used-in-25-Percent-of-Global-Chip-Production-Memory-Segment-Hit-Hard.aspx

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