In what is clearly a lucky break for the majority of the semiconductor industry in Japan, the massive earthquake and tsunami that followed has not been directly disruptive as it could have been.
Having collected official statements from countless company websites since last Friday’s initial earthquake (those will get added to the top story running report tomorrow), few facilities are out of action.
However, what is immediately apparent since the weekend is that few semiconductor plants will be back in action this week. Indeed major companies such as Honda are keeping production plants switched-off for an entire week so that they can accommodate the wishes of the Japanese Government to conserve energy until the power companies have assessed the full impact on supply.
Based on a number of statements from semiconductor manufacturers they are also adhering to the call. Heavy industries such as steel and glass were also planning to push-out a restart of production until the situation became clearer.
Therefore, concern is now focused on the shortage of electricity that affects approximately 45 million people in Tokyo Electric Power Co (TEPCO) service area covering Tokyo, Tochigi, Gunma, Ibaraki, Chiba, Kanagawa, Saitama and Yamanashi prefectures.
TEPCO said that its service area would be divided into 5 zones and would need to suspend electricity supply for several hours each day to each zone on a rolling basis.
However, Tokyo is being sparred cuts at the moment as central government, company headquarters and financial institutions are heavily located in the capital city.
With TEPCO suffering from acute energy transmission shortages due to the shutdown of nuclear reactors along the east coast region of the country, the utility said that rolling blackouts would more than likely remain in place through to the end of April.
However, other power providers such as Tohoku Electric Power Co did not expect to implement blackouts, though it would be constantly evaluating the situation.
A prolonged disruption to power supplies would be expected to disrupt manufacturers output over the coming months, though with many in central and southern regions, disruptions could be minimal.
The problem will focus on those suppliers that do become impacted by TEPCO’s rolling blackouts, which would be expected to reduce capacity output during this period and could impact customers in other regions in their ability to continue full production.
In the case of previous major earthquakes in industrialized nations, such as Taiwan, which saw replacement equipment parts and materials hold back a return to full production, long after power supplies were restored, its the little things that really have a longer lasting affect.
Thermal processes depend on highly reliable power supplies as the processes have long cycle-times. Despite planned blackouts, production would be severely limited or completely curtailed until full restoration of power or a guarantee of secure power was given.
One of those long cycle-time products is silicon wafers and Japan has several major producers. Even if their facilities were not affected directly by the disaster they may well be indirectly, and not necessarily for a week but it could be for months.
Part of the problem already is lack of transparency. In my trawling of sites over the last four days it soon became clear that some firms were quick to respond with statements on their websites or press releases on the wires. Though few really gave any insight, I can’t but praise the fact that some were reporting on the impact within 24hrs.
We are four days now after the event and some companies still have not given a public statement concerning their business operations after the disaster.
A few in the first part of the IC supply chain concern me at the moment. These are some of the polysilicon/wafer suppliers such as SUMCO and Shin-Etsu.
SUMCO has two plants in the north east region but as yet there has been no official statement from SUMCO regarding any possible disruptions to supply.
Shin-Etsu on the other hand has closed three semiconductor wafer plants and had 35%+ share of worldwide semiconductor wafer market.
MEMC said that its Utsunomiya facility, which is approximately 130 miles from Sendai, one of the worst affected areas, would remain suspended pending the inspections. What concerned me was the small sentence in a statement that said the following:
MEMC expects that shipments from this facility will be delayed over the near term.
It may be down to compliance with government wishes but we don’t yet know whether their supply of energy is a short or near-term issue. Again, lack of real transparency is the issue.
The energy problem isn’t just because transmission lines are down in affected areas. Japan relies on nuclear power for approximately 33% of its energy requirements and four reactors are in trouble, with others yet to come back on-stream.
Market research firm IHS iSuppli noted the following:
Japan also is the world’s largest supplier of silicon used to make semiconductor chips—at about 60 percent of the global total. If this supply is disrupted due to the logistical and infrastructure challenges Japan is facing this will have an impact not only on NAND flash memory, DRAM, microcontrollers, standard logic, LCD panels and LCD parts, it will also affect other families of products such as discretes, i.e. MOSFETs, bipolar transistors and small signal transistors. Infrastructure challenges will slow or suspend shipments from Japan during the next two weeks.
The next two weeks could be an understatement. The problem is - it's still too early to really tell.
Experience of covering the last major earthquake that impacted the semiconductor industry in Taiwan tells me that once you get over the initial issues of tracking physical damage to facilities it’s the unexpected things that really cause problems.
As in Taiwan, lack of quartz furnace gear delayed the return to full production as the product simply wasn’t on the shelf in the quantities required due to the damage done by shock loads and furnace shutdowns to get everyone back online at the same time.
I can’t believe that won’t be an issue again this time but it is probably too early to tell. Unlike in Taiwan, Japan faces an energy shortage that may take months not weeks to correct, but again it is probably too early to tell.