Any Disruption Could Be Significant

By Jeffrey Burt  |  Posted 2011-03-11 Print this article Print


Any disruption could be significant, the firm wrote. While Japan has a strong share of the world's DRAM manufacturing market, the two top DRAM fabs in the country, run by U.S. based-Micron and Japan's Elpida, have not been directly impacted, the firm said.

In addition, Japanese companies-primarily Toshiba-account for 35 percent of global NAND flash production in terms of revenue, IHS iSuppli said.

Globally, companies headquartered in Japan ranked third in 2010 in semiconductor production, the firm said. The Asia-Pacific region outside of Japan ranked first, followed by the Americas. Of the 300 global semiconductor suppliers IHS iSuppli tracks, 39 are based in Japan.

Malcolm Penn, CEO of Future Horizons, a semiconductor market research firm in Europe, said in an interview with the Electronics Weekly news site that the impact on the industry could be large, and sharply criticized executives of tech firms that consolidated so much of their operations in the region to save money while ignoring the benefits of diversification, in everything from location to suppliers.

"It's [yet another] red flag warning though: 'Don't put all your eggs in one basket,'" Penn told the news site. "How many more warnings do the balance sheet-driven CEOs and CFOs need? You can fiddle with your spreadsheets all you want, but the bottom line is: If you can't get the wafers, you will have zero sales; 100% correlation. And if everyone buys from the same (now very limited) source, the risks of a problem are getting higher and higher."

He said Japan produces about a quarter of the world's silicon chips and as much as half of the NAND chips. He noted other countries in the region that also produce high levels of chips. Korea produces almost 20 percent of the world's silicon chips and most of the DRAM supplies, while Taiwan makes most of the advanced logic and SoCs (systems on a chip). If a similar natural disaster hit Taiwan, "that would kill all the fables firms: Qualcomm, Broadcom, Marvell, MediaTek, Nvidia, Xilinx, etc.," he said.

Objective Analysis' Handy said earthquakes smaller than the one that hit northern Japan have stopped production in the past.

"As a matter of comparison, the Taiwan earthquake in 1999 that caused significant damage in Taipei and stopped fabs in Hsin Chu was a magnitude 7.6, less than one tenth the power of Japan's earthquake," he wrote. "The 1989 Loma Prieta earthquake that stopped production in Silicon Valley measured 6.9, or one hundredth the strength of today's earthquake."

There also have been earthquakes in Japan between 5.9 magnitude and 6.8 over the past few years, all of which raised the concerns of the semiconductor manufacturers.

Future Horizons' Penn agreed that it doesn't take much to throw the industry off its rails.

"A microsecond power supply glitch wiped out production at one of the Toshiba factories just before Christmas," he said. "A more serious interruption would bring the NAND market to its knees, especially as no one holds inventory anymore-'It's too expensive,' scream the bean counters and Wall Street, until you can't get it."


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