WSJ: Japan Quake Rattles Chip Industry

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By DON CLARK, Saturday, March 12, 2011

Japan's massive earthquake affected operations at dozens of semiconductor factories, raising fears of shortages or price increases for a number of widely used components - particularly the chips known as flash memory that store data in hit products like smartphones and tablet PCs.

! N* b0 ], U& E5 {4 Q: mMany workers evacuated on top of factory buildings after beer-making facilities collapsed at a brewery in Sendai.
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The quake struck hundreds of miles from many key chip plants, including most of the factories that account for the bulk of Japan's flash-memory production. Most such factories are designed to withstand big quakes, and analysts expect little damage to structures or the costly machines that fabricate chips on silicon wafers.
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6 Z5 ]( f, l- E) k1 Z2 p0 h2 X5 Q6 `But some manufacturers are likely to be affected by other issues, particularly disruptions in transportation of finished goods to airports or ports as well as the movement of employees and supplies to production plants. In addition, some of the biggest makers of consumer-electronics products that use chips are based in Japan, potentially affecting demand for chips.
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# q4 V5 a+ t  |7 j6 ]- T"This could have a pretty substantial impact for the next quarter on the whole supply chain," said Len Jelinek, an analyst at IHS iSuppli, a market-research firm that focuses on the electronics industry.

; Q7 s$ l$ R- j/ A, SJim Handy, another market-watcher at the firm Objective Analysis, said he expects "phenomenal" price swings and large near-term shortages as a result of the quake.
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Chip companies based in Japan generated about $63.8 billion in revenue in 2010, accounting for about one fifth of the semiconductor market, IHS iSuppli says. Their biggest impact is on the hot market for what the industry calls NAND flash memory, which are at the heart of products like Apple Inc.'s iPhone and iPad. Japanese companies, led by Toshiba Corp. (6502), account for about 35% of global flash revenue.
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The earthquake hit the Japanese coast more than 200 miles north of Tokyo, while the big flash-memory plants operated by Toshiba and SanDisk Corp. are south of the city. Mike Yang, another IHS iSuppli analyst, predicts those companies should suffer minimal disruptions in their ability to keep making those chips - though they could experience delays in shipping them outside Japan to be packaged and tested. He expects any shortages or higher prices that could be caused by the problem to be relatively minor.

" T4 h3 |& S& B7 cDeborah Chalmers, a U.S. spokeswoman for Toshiba, said all of its factories are being inspected for damage and the company continues to gather information about the impact of the disaster. A factory at Iwate in northern Japan, known for products other than flash memory, has apparently been suffered a power outage, she said."In addition to delivery interruptions that may arise from factory damage, shipments of product may be affected by disruptions in road, rail, sea, and air transportation within and from Japan," Ms. Chalmers said.
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: Q+ E* ]. t8 oSanDisk, based in Milpitas, Calif., manufactures flash-memory in a joint venture with Toshiba. Its operations south of Tokyo felt "modest" impact, said Mike Wong, a SanDisk spokesman. The manufacturing operations were stopped temporarily and there was "some loss" of silicon wafers that were being processed. "Operations have since resumed and are currently operating," but the overall impact is still being assessed, Mr. Wong said.

% w; ]- e! m% ]# ^Companies with factories close to the quake's epicenter include Freescale Semiconductor Inc., which makes chips called microcontrollers in a factory in Sendai. Robert Hatley, a spokesman for the Austin, Texas, company, said the Sendai facility was evacuated and currently has no electrical power. The company is making plans to evaluate the plant's condition once power is restored, Mr. Hatley said.

8 O& o9 c9 C# [Another company with chip factories in northern Japan is Renesas Electronics Corp. (6723), a company based in Japan that also makes microcontrollers.

8 e5 b) U- ]2 W7 V"Right now, the team in Japan is checking on damage that may have occurred to our facilities," said Denise Garibaldi, a U.S. spokeswoman for the company. "As aftershocks are frequently occurring, our priority right now is to ensure the safety of our employees and carefully assess the status of any damage."

) \- H. l: P# K: Y+ s* gON Semiconductor Corp., a Phoenix-based chip maker with about 6,000 employees in Japan, said four of its five manufacturing facilities experienced some damage--mainly characterized as "limited"--with only one reporting a loss of electrical power. "We are currently assessing facility and customer impact," the company said on its website.