Full Production Not Yet Possible at Many Japan Chip Plants, Says IHS iSuppli

Japan semiconductor facilities that suspended manufacturing after the March 11 9.0-magnitude quake won’t be able to start full production again until the aftershocks completely stop, IHS iSuppli said. With every tremor exceeding magnitude-5.0, equipment “automatically shuts down,” it said.

Impacted plants doing volume production for semiconductor manufacturing operations include a Freescale wafer fabrication facility in hard-hit Sendai, 70 miles north of the damaged Fukushima Daiichi nuclear plant. The facility manufactures flash memory embedded microcontrollers, analog and digital embedded microcontrollers, pressure sensors and acceleration sensors, Freescale said. The plant sustained no flooding from the tsunami, but “the persistent power and communication disruptions, fuel constraints and other earthquake-related disruptions continue to complicate both our damage assessment of the facility and our efforts to provide humanitarian relief to our Sendai employees and their families,” Freescale CEO Rich Beyer said in a letter to customers. He said the company hoped “within the next week … to be able to provide more clarity regarding factory damage."

In all, there are 130 production semiconductor fab lines in 53 locations in Japan, IHS iSuppli said. The other facilities include five by Fujitsu, eight by Panasonic, one each by Micron Technologies and Mitsubishi, four by Sony Semiconductor, two by Texas Instruments, and six by Toshiba, the research company said.

Electronic distributors reported “a surge in orders from OEM customers, trying to ensure they have sufficient inventory on hand to ride out any interruption in supply,” IHS said. Although “the semiconductor supply disruptions are bad, they could have been worse; the recent buildup in global semiconductor inventory may serve to mitigate the impact of reduced supply from Japan,” it said.

Japan’s rolling power outages (CED March 15 p1) that bring “frequent electricity supply interruptions in some areas … represent a particular hazard in the production of raw materials for semiconductor manufacturing,” IHS iSuppli said. Japan is the No. 1 global producer of the main raw material used in semiconductor manufacturing -- silicon, it said. “The country is also a major provider of chemicals for semiconductor production,” and some of those chemicals “are hazardous, and power interruptions could lead to dangerous events, such as explosions or the release of poisonous material,” it said.

Apple faces potential component supply problems for its iPad 2 because a recent IHS iSuppli teardown analysis of the device (CED March 15 p3) was able to identify five parts sourced from Japanese suppliers: NAND flash from Toshiba, dynamic random access memory by Elpida Memory, an electronic compass from AKM Semiconductor, a touch screen overlay glass “likely from Asahi Glass,” and the system battery from Apple Japan, the research company said. While some of Apple’s suppliers “reported that their facilities were undamaged, delivery of components from all of these companies is likely to be impacted at least to some degree by logistical issues now plaguing most Japanese industries in the quake zone,” IHS said.

Apple said last week that the record quake and tsunami forced it to delay the launch of the iPad 2 in Japan “while the country and our teams focus on recovering from the recent disaster” (CED March 17 p8). The device was to ship there March 25, after a March 11 U.S. launch. Apple didn’t give a new Japanese ship date.

"Suppliers are expected to encounter difficulties in getting raw materials supplied and distributed as well as in shipping out products” from Japan, IHS said. “They also are facing difficulties with employee absences because of problems with the transportation system,” it said.

The Japan issues came as Apple was already “rushing to ramp up iPad 2 production to meet stronger-than expected demand for the device,” the research company said. IPad shipments from the Apple Store “were delayed by one week from previous lead times because of the surge in demand,” IHS said.

NAND flash supplies to Apple could be impacted by “a temporary suspension of production and the resulting scrapping of some wafers at Toshiba’s main NAND production facility,” the research company said. Apple, however, may be able to source NAND for the iPad from alternate companies including Samsung or Micron Technology, IHS said. The Elpida DRAM component can also be “alternatively sourced from Samsung,” the research company said. But it said “the compass and glass supply could prove to be more problematic issues for Apple. Although AKM said its fab that produces the electronic compass used in the iPad was undamaged by the quake, the company’s shipments are likely to be impacted by the same logistical issues that will plague all Japanese industries during the short term.”

While the iPad 2’s three-cell battery pack was labeled “assembled in China,” the label referred to the entire battery pack as “further investigation showed the battery itself was made by Apple Japan,” IHS said. Battery cells are usually made at the site of assembly, but “because the iPad 2’s lithium-ion polymer battery is unusually thin, it likely requires advanced battery cell manufacturing technologies that reside in Japan,” said IHS analyst Wayne Lam. “Logistical disruptions may mean that Apple could have difficulties obtaining this battery, and it may not be able to secure supply from an external, non-Japanese source,” IHS said. -- Jeff Berman

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Correction: Epson’s high-temperature polysilicon LCD plants in Chitose and Suwa Minami, Japan, that produce displays for front projectors were unaffected by the March 11 quake. The plant in Sakata that was hit by power outages (CED March 16 p1) makes semiconductors.