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Japan quake could hit semiconductor production, prices

Lucas Mearian | March 11, 2011
Lesser earthquakes have in the past affected manufacturing

FRAMINGHAM 11 MARCH 2011 - Because Japan produces more than 40% of the world's NAND flash memory chips -- and 15% of its DRAM -- the 8.9-magnitude earthquake that hit today could seriously affect worldwide semiconductor supplies, according to research firmsAccording to Jim Handy, an analyst with semiconductor research firm Objective Analysis, it would not take a large drop in wafer production to cause prices to increase dramatically. Even a two-week shutdown of fabrication plants would remove from production a sizable share of wafers. As a result, the research firm is predicting major price swings and near-term shortages

Earthquakes of lesser magnitudes, such as a 5.9-magnitude one in 2008 and two quakes measuring 6.0 and 6.8 in 2007, raised similar concerns about the semiconductor industry, according to Objective Analysis.

"The way I look at it is that Tokyo had buldlings catch on fire and an oil refinery just north of the city caught on fire. So I have to look at everything [near] the city, and consider that it could be seriously impacted," Handy said.

Not everyone agrees with the Objective Analysis view, however. Market research firm iSuppli does not believe that DRAM and NAND production will be affected by the quake.

ISuppli analyst Mike Howard said his contacts in Japan have indicated that production at facilities owned by Micron, Toshiba and Elpida Memory are far enough away from the quake's epicenter to avoid damage. "They are all in the southern and western portion of Japan -- well away from the epicenter. I wouldn't anticipate any production reduction," he said.

Howard argued that the major impact on Japan's semiconductor production will likely come from disruption to the supply chain.

"Suppliers are likely to encounter difficulties in getting raw materials supplied and distributed and shipping products out," iSupply said in a statement late this afternoon. "This is likely to cause some disruption in semiconductor supplies from Japan during the next two weeks, based on [our] preliminary assessment of the situation.

The two major DRAM fabrication facilities in Japan, operated by U.S.-based Micron and Japan's Elpida, have not been directly affected, according to preliminary indications from iSuppli contacts.

Objective Analysis argued that semiconductor demand will likely be affected, whether fabrication facilities are closed or not, because many electronics manufacturers are in Japan, and their consumption of semiconductors stop until earthquake damage is repaired.

Today's earthquake already forced Sony to shut down production in six of its northeastern factories; Nikon, which has facilities close to the quake's epicenter, may also have been affected, according to early reports.


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