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Supply chain impacts of Japan earthquake tragedy

The devastating earthquake and tsunami in northeastern Japan last week has resulted in an untold loss of lives and a potentially crippling impact on Japan’s economy, which is now sending rippling effects throughout the electronics industry supply chain as manufacturers try to assess the full extent of the damage.

Because northeastern Japan’s primary nuclear power plant is not operational, it will have a significant impact on power supply in the region. TrendForce expects there will be limited power supply or a complete power outage over the next two weeks in the industrial area in northeast Japan. However, plans on how to distribute the limited power have been made.

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The power outage has caused production to shutdown silicon wafer fabs at Shin-Etsu Semiconductor and SUMCO. Both companies also have damage to their production lines. As a result, silicon wafer supply will drop significantly, likely resulting in global semiconductor players outside of Japan to compete for materials, said TrendForce.

According to DRAMeXchange, Shin-Etsu Semiconductor primarily provides 12-inch silicon wafers, and 95 percent of these wafers is used in the semiconductor industry. Shin-Etsu Semiconductor is a major wafer silicon supplier to Elpida and Toshiba, according to the market research firm.

Most Japanese semiconductor companies are still evaluating the damage caused by the earthquake. Panasonic has reported some minor injuries to employees at several of its companies including AVC Networks Company Fukushima Factory (manufacturing digital cameras), AVC Networks Company Sendai Factory (manufacturing optical pickups), Panasonic Electric Works Co., Ltd. Koriyama Factory (manufacturing electronic materials), and SANYO Electric Co., Ltd. Gunma Factory (manufacturing washer/dryers etc). The company also reported damage to equipment, buildings and production. No further details were provided.

Texas Instruments (TI) reported that its Miho and Aizu sites and its Tokyo offices were impacted by the initial earthquake. The chip maker reports no injuries to employees at these sites. A fourth TI site in Hiji was not impacted.

Spot price quotes halted for DRAMs

Japan’s earthquake is expected to impact the DRAM market. Samsung and Hynix have stopped providing spot price information, according to DRAMeXchange. In Taiwan, PSC has stopped quoting DRAM spot prices, and is waiting to learn more about the current situation to make necessary adjustments, reported the market research firm. Nanya Tech also is evaluating the situation.

DRAMeXchange also reports that spot price in China has started increasing because the expected supply is likely to be impacted.

Here is DRAMeXchange’s analysis of the impacted plants.

Although Toshiba’s NAND production line only has experienced a minor setback, the company is evaluating the impact the earthquake will have on material supply, traffic, and Japan’s basic construction, reported DRAMeXchange.

Toshiba’s 12-inch plant in Iwate Prefecture primarily produces logic and consumer ICs. Due to its close proximity to the epicenter, the production in Iwate Prefecture will be impacted severely, while memory production in the Kansai area escaped with minor damage.

There is no confirmation of serious damage to the Toshiba and SanDisk Fab3 and Fab4 Flash memory plants; they are located about 800 miles away from the epicenter. Based on SanDisk’s official statement, production did stop temporarily but no employees were hurt, said DRAMeXchange.

EnergyTrend, a research subsidiary of TrendForce focusing on the green energy industry, indicated that most solar cell manufacturers including Sharp, Sanyo, and Kyocera are in the Kanzai area of Japan, which means the impact of the earthquake will be minimal.

Sony evacuated staffs from its plants in northeastern Japan. Production of Blu-ray discs, magnetic heads and batteries will impacted because of power loss, said EnergyTrend.

Though the impact on supply is temporarily insignificant, Korean and Taiwanese battery makers might see increased orders, said EnergyTrend. The market research firm also expects that Korean and Taiwanese battery protection IC manufacturers to benefit because Seiko’s plant shutdown will have the biggest impact on overall supply.

As for upstream material suppliers, Mitsubishi Chemical and Seiko are both on the watch list, reported EnergyTrend. Mitsubishi Chemical’s anode powder is primarily used for NB applications in the Japanese market. Seiko’s battery protection IC is used by many NB brands, particularly Apple’s new iPad 2.

Sony’s battery cell manufacture, supplying NB applications and power tools, was impacted as well, said EnergyTrend. For the NB applications, the shutdown of battery supply is estimated to be two weeks with impact of 8M. However, because its battery pack needs to be assembled in China, there is still a chance that existing inventory may be sufficient, said the market research firm. This means if Sony can restart production lines in two weeks with successful shipment, the impact will be minimal.

As for LCD panel supply, Witsview, a research division of TrendForce, indicates that most major LCD panel manufacturers are in the Kansai region, which means they have not been significantly impacted by the earthquake

However, the impact caused by the earthquake in the Kanto region may inevitably shut down the PLD (origin IPS) six-generation fab, which is considered a closed supply chain because it mostly supplies Panasonic with LCD TV panels. This IPS-a production line for Panasonic’s TFT-LCD is a six-generation fab in Mobara. Reports indicate that every staff member is safe, cell phone reception is available, and only some factories have been affected, reported Witsview.

A major concern for the industry is the impact on Corning Japan located in Kakegawa, Shizuoka, whose capacity accounts for 70 percent of total capacity of Corning Japan. Corning issued a statement on March 11 reporting that there is no equipment damage and no injuries to staff members at its plant.

Witsview does not expect the earthquake to significantly impact the TFT industry. LEDinside also doesn’t expect the LED industry to be impacted by the earthquake since the two leading LED manufacturers in Japan, Nichia and Toyoda Gosei, are far from the disaster area in northeast Japan. However, it’s not known at this time if SDK’s LED production line, located in Chiba, has been impacted.
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