Recovery Continues in Japan As Semiconductor Chip Suppliers Work to Restore Damage

Market research firm IHS iSuppli reports that the Japanese 9.0 magnitude earthquake, and subsequent tsunami, has resulted in the suspension of one-quarter of the global production of silicon wafers used to make semiconductors. As a result, manufacturing operations have stopped at Shin-Etsu Chemical’s Shirakawa facility.

Similarly, MEMC Electronic Materials (News - Alert) 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, according to IHS iSuppli .

As reported by the market watcher, Shin-Etsu Chemical’s Shirakawa facility produces large 300 mm (12-inch) 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 chips. Hence, by this stoppage, the global supply of memory chips will be impacted the most. Logic devices represent the next largest use of these wafers.

In reality, customers for these wafers are international. Consequently, the implications are wide ranging, said the research firm. A 25 percent reduction in supply could have a major effect on worldwide semiconductor production.

Shin-Etsu reported that there has been damage to the Shirakawa plant’s production facilities and equipment. Located in Nishigo Village, Fukushima Prefecture, the plant is responsible for 20 percent of global silicon semiconductor wafer supply.

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.

Likewise, as per IHS (News - Alert) report, 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. As a result of the earthquake and tsunami, MEMC 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, Mitsubishi Gas Chemical Company and Hitachi (News - Alert) Kasei Polymer, have announced that they have stropped production that amounts to 70 percent of the worldwide supply of the main raw material used to produce printed circuit boards (PCBs). However, these companies expect to resume production of the raw material called copper-clad laminate (CCL (News - Alert)) 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, as long as the interruption doesn’t last significantly longer than two weeks.

DRAM maker Elpida Memory 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.

Meanwhile, Elpida announced that its packaging and testing subsidiary Akita Elpida Memory has resumed operations following the restoration of the electrical power supply. Akita Elpida had not been in operation due to a power outage caused by the massive earthquake, said the maker in a press release.

Because Elpida outsources more than 90 percent of its packaging and testing operations to overseas firms, the impact on company earnings due to the shutdown of Akita Elpida is expected to be minimal.

Similarly, last week Fujitsu (News - Alert) said in a released statement that it is postponing the recruitment of new employees through June 1 due to the devastating Tohuku earthquake. Media reports indicate that the company suffered large-scale damages to its facilities in the Iwate, Miyagi and Fukushima prefectures.