Japan Earthquake Rattles Chip Production: Report

Japan's earthquake has suspended 25 percent of the global production of silicon wafers, according to a new research report, perhaps impacting semiconductors.

The Japanese earthquake has apparently suspended 25 percent of the global production of silicon wafers, according to a new report from research firm IHS iSuppli. Those wafers are used to craft semiconductors, which has far-reaching implications for high-end enterprise hardware such as PC, server and IT storage systems, as well as consumer products like smartphones and tablets.

The epic scale of the damage has the potential to force slowdowns in the manufacture of consumer products. On March 17, IHS iSuppli also reported that Apple could face difficulties meeting demand for the iPad 2, which includes components apparently sourced from Japanese companies.

Shin-Estu Chemical Co. Ltd.'s Shirakawa facility, along with MEMC Electronic Materials Inc.'s Utsunomiya plant, have stopped manufacturing operations in the wake of the March 11 earthquake and subsequent tsunami. The Shirakawa facility specializes in 300-millimeter wafers used in advanced semiconductors with high transistor counts, used primarily in the manufacturing of components such as flash memory.

"These companies supply not only domestic Japanese demand for wafers but also semiconductor manufacturers around the world," reads IHS iSuppli's March 21 research note. "Because of this, the suspension of operations at these plants could have wide-ranging implications beyond the Japanese electronics industry."

Two companies, Mitsubishi Gas Chemical Company Inc. and Hitachi Kasei Polymer CO. Ltd., also announced that they had halted production of the raw material used to build printed circuit boards (PCBs), effectively curtailing some 70 percent of the worldwide supply. Production will apparently resume within two weeks.

"With current inventory levels, IHS iSuppli believes that there likely is sufficient supply of finished PCBs and raw CCL material to keep electronics production lines running at global electronics manufacturers," reads the firm's note, "as long as the interruption doesn't last significantly longer than two weeks."

The earthquake's potential effects on the worldwide electronics industry have been detailed for weeks.

"Japan remains a leading producer of NAND flash, CMOS Image Sensors, ASICs, and DRAM," analysts at Deutsche Bank wrote in a March 15 report. "Given the disparate location of Fabs and the impact of rolling power outages, it is difficult to estimate the impact on semiconductor production. However within our coverage universe SanDisk has the most exposure with 100 percent of its front-end facilities in Japan (through Toshiba JV)."

Market research firm Objective Analysis claimed March 11 that more than 40 percent of the world's NAND flash memory chips and 15 percent of global DRAM supplies hail from Japan. Flash is the main memory component in a variety of mobile products such as tablets.

Although a few companies reported their facilities were undamaged by the earthquake, a combination of employee absences, transportation and shipping problems, and electricity interruptions could all contribute to a slowdown or stoppage in manufacturing.

According to IHS iSuppli, iPad 2 components sourced from Japan include Toshiba NAND flash, DRAMs from Elpida Memory, system battery from Apple Japan, and an electronic compass from AKM Semiconductor.

In the wake of the earthquake, Apple called off the iPad's scheduled Japan rollout, declining to set a new date.