News Article
Earthquake impact
The devastating earthquake in Japan has resulted in impacts along the semiconductor value chain around the world.
The Japanese earthquake has resulted in the suspension of one-quarter of the global production of silicon wafers used to make semiconductors. Manufacturing operations have stopped at Shin-Etsu Chemical Co. Ltd.’s Shirakawa facility. MEMC Electronic Materials Inc. also stopped manufacturing at its Utsunomiya plant. Together, these two facilities account for 25 percent of the global supply of silicon wafer used to make semiconductors. Wafers are thin slices of silicon that serve as the substrate of semiconductor devices. All semiconductors are built on wafers.
The facility in question Shirakawa facility produces large 300mm wafers, which are used in more advanced semiconductors that have high transistor counts. The wafers made by this facility mainly are used in the manufacturing of memory devices, such as flash memory and DRAM. Because of this, the global supply of memory semiconductors will be impacted the most severely of any segment of the chip industry by the production stoppage. Logic devices represent the next largest use of these wafers.
These companies supply not only domestic Japanese demand for wafers but also semiconductor manufacturers around the world. Because of this, the suspension of operations at these plants could have wide-ranging implications beyond the Japanese electronics industry. A 25 percent reduction in supply could have a major effect on worldwide semiconductor production.
Shin-Etsu’s Shirakawa plant is responsible for 20 percent of global silicon semiconductor wafer supply. The plant is located in Nishigo Village, Fukushima Prefecture Shin-Etsu reported that there has been damage to the plant’s production facilities and equipment. To compensate for the lost manufacturing, Shin-Etsu said it would set up production systems at other facilities. However, the company warned it was unclear how long it would take to restore the damaged facilities and equipment.
MEMC said it evacuated employees and suspended operations at its Utsunomiya plant after the earthquake. The Utsunomiya facility accounts for 5 percent of worldwide semiconductor wafer supply. MEMC said it expects that shipments from this facility will be delayed during the near term.
In another development for the global electronics supply chain, two Japanese companies announced they have stropped production that amounts to 70 percent of the worldwide supply of the main raw material used to make printed circuit boards (PCBs). PCBs are used in all electronic products, from PCs to smart phones, to digital wristwatches.
The companies, Mitsubishi Gas Chemical Company Inc. and Hitachi Kasei Polymer Co. Ltd., said they will resume production within two weeks of the raw material called copper-clad laminate (CCL).
However, 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, as long as the interruption doesn’t last significantly longer than two weeks.
Elpida Memory Inc. said its semiconductor assembly facility in Yamagata has been damaged. The company also said a lack of electricity is impacting production. The Yamagata facility’s utilization rate now is at less than 50 percent.
Confirming what IHS iSuppli noted in a previous release, AKM Semiconductor said its fab producing electronics compasses for the iPad 2 has not been damaged. The main fab for the production of the compass is located in Nobeoka, on the South island of Japan and did not suffer any power cut either.
IHS iSuppli had warned the company’s delivery of products potentially could be affected by the same logistical and power supply issues impacting all Japanese industries. AKM has noted that it already uses multiple fabs including one external source for the fabrication of its compass. Also the compass is fabricated using standard CMOS process and the production can easily be transferred to any CMOS foundry in the world. The company said this should enable AKM to overcome logistical hurdles that may arise.
The earthquake has damaged about 40 percent of the total wafer capacity of Renesas Electronics Corp. The company has stopped production at its Tsugaru fabs producing analog and discrete devices, at its Naka facility making system-on-chip and microcontroller devices, and at its Takasaki and Kofu fabs making analog and discrete parts.
Half of the total wafer capacity at Fujitsu has been damaged. While the company’s fabs and wafer equipment are intact, the shortage of electricity, gas and wafers means it will take three or four weeks for the company to recovery production.
The aftermath of the Japanese earthquake may cause logistical disruptions and supply shortages in Apple Inc.’s iPad 2, which employs several components manufactured in the disaster-stricken country—including a hard-to-replace electronic compass, the battery and possibly the advanced technology glass in the display, IHS iSuppli research indicates.
The IHS iSuppli teardown analysis of the iPad 2 so far has been able to identify five parts sourced from Japanese suppliers: NAND flash from Toshiba Corp., dynamic random access memory (DRAM) made by Elpida Memory Inc., an electronic compass from AKM Semiconductor, the touch screen overlay glass likely from Asahi Glass Co. and the system battery from Apple Japan Inc.
There potentially are other components from Japan in the iPad 2, however, the teardown analysis process cannot always identify all components’ countries of origin.
While some of these 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. Suppliers are expected to encounter difficulties in getting raw materials supplied and distributed as well as in shipping out products. They also are facing difficulties with employee absences because of problems with the transportation system. The various challenges are being compounded by interruptions in the electricity supply, which can have a major impact on delicate processes, such as semiconductor lithography.
Furthermore, semiconductor facilities in Japan that had suspended manufacturing activities following the quake cannot truly commence full production again until the aftershocks cease. “Earthquakes ranging from 4 to 7 on the Richter scale will make it impossible to really restart these fabs until the earthquakes stop happening with such frequency,” said Dale Ford of IHS. “Every time a quake tops 5, the equipment automatically shuts down.”
These issues may come at a time when Apple is rushing to ramp up iPad 2 production to meet stronger-than expected demand for the device. The company this week announced that iPad shipments from the Apple Store have been delayed by one week from previous lead times because of the surge in demand.
Apple’s supply of NAND flash has come under scrutiny in light of a temporary suspension of production and the resulting scrapping of some wafers at Toshiba’s main NAND production facility. However, the NAND devices used in the iPad are available from alternative sources, including South Korean semiconductor giant Samsung Electronics Co. Ltd. and U.S. memory maker Micron Technology Inc.
Similarly, the Elpida DRAM component can be alternatively sourced from Samsung.
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.
Compasses are available from other sources including Yamaha, Aichi Steel, Alps and STMicroelectronics. However, these components are not easily replaceable.
“The calibration of electronic compasses is tricky for a number of reasons,” said Jérémie Bouchaud, director and principal analyst for MEMS and sensors at IHS. “Compasses are sensitive to electromagnetic interference. Furthermore, the iPad 2’s compass works in close coordination with the tablet’s accelerometer and gyroscope. This makes it impossible to simply replace one manufacturer’s compass with another.”
The glass used in the iPad 2’s touch screen overlay could present another supply problem for Apple. While the supplier of this glass cannot be confirmed with certainty, the concurrent release of the iPad 2 and the new Dragontrail Glass technology from Asahi Glass of Japan has led to speculation that Asahi may be the supplier of this durable new glass, according to Kevin Keller, principal electronics analyst for IHS.
Physical tests conducted by IHS reveal that the iPad 2 glass is more flexible and durable than the glass used in the iPad 1, possibly indicating that the glass is Asahi’s Dragontrail.
Asahi Glass reported damage to two of its facilities and damage at a third.
The lithium-ion polymer battery in the iPad 2 also is manufactured in Japan, the IHS iSuppli Teardown analysis service has determined.
The iPad 2’s three-cell battery pack on the iPad 2 is labeled “assembled in China.” However, this label refers to the whole battery pack. Further investigation showed the battery itself was made by Apple Japan, which operates as a subsidiary of Apple.
“Typically, battery cells are 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 Wayne Lam, senior analyst, competitive analysis, at IHS.
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.