yes......more on Taiwan quake......
Taiwan quake sparks chip aftershock
With 12% of the world's semiconductors and nearly half of all motherboards made in Taiwan,
industry braces for impact
By John W. Schoen
MSNBC
Sept. 21 — The earthquake that rocked Taiwan is sending reverberations throughout the global
semiconductor market that may echo for weeks or even months, say industry analysts and
executives. While the long-term impact is not yet clear, most expect higher prices for some chips
and a scramble for the components made by several key Taiwanese chip plants.
EARLY REPORTS INDICATE that the damage to chip plants clustered in the Hsinchu Science
Industrial Park was limited to broken glass and downed power lines. Initial estimates place total
damages at about $150 million.
But the process of making semiconductors is extremely sensitive to vibration and dust. That
means half-made chips will have to be discarded. And recalibrating sensitive chip-making
equipment could take several weeks — or longer.
“It will take a while,” said Dan Niles at BancBoston Robinson Stephens. “It's not easy to make sure
a billion-dollar fab is running right.”
In fact, the full extent of the damage may not be known until the first batch of chips rolls off the line
after production has been restarted.
“You can do all the calibrating you want, but in the end you may discover there's more tweaking
you have to do,” said Drew Peck at S.G. Cowen & Co.. “You have to have a full production cycle of
6 to 8 weeks to find out if there are problems. That's just the nature of the semiconductor industry.
This kind of uncertainty may overhang this business for awhile. ”
Merrill Lynch semiconductor analyst Joseph Osha says the Taiwan quake will likely disrupt chip
supplies for about two weeks.
Semiconductor production in Taiwan is booming, thanks to strong demand for chips used to make
everything from personal computers to cellphones. Taiwan makes some 12 percent of the worlds
chips, including supplies for so-called “fabless” chip companies that farm out production to
foundries.
At Taiwan Semiconductor Manufacturing Co., {TSM} one of the world's largest foundries, business
is up sharply this year. (Philips Electronics owns 28 percent of the company.) Second quarter
profits jumped 60 percent, and the company said it was running at full capacity and turning out
record shipments of silicon wafers. Demand typically increases in the third and fourth quarters as
PC makers gear up for Christmas sales.
RIPPLE EFFECT
“If (production is interrupted for) one to two weeks, pretty much everybody (in Taiwan) can recover
from that — provided they can get their employees to work,” said C. Vin Prothro, CEO of Dallas
Semiconductor {DS} . “If it's longer, there could be a Christmas season delay. It can absolutely
have a ripple effect.”
Taiwan's other major chip foundry, United Microelectronics, is also expected to be offline for
several weeks. Shares of semiconductor makers Xilinx {XLNX} and Altera {ALTR}, which farm out
production of their chips to Taiwan, sold off sharply Monday on fears of the impact of a supply
interruption. (Altera officials said Tuesday they believe they can make up for most of any chip
shortages from other sources.) Other companies that get half or more of their chip supplies from
those Taiwainese foundries are C-Cube Microsystems {CUBE}, Broadcom {BRCM}, Galileo
Technology {GALT}, Conexant Systems {CNXT} and PMC Sierra {PMCS}, according to analysts.
Taiwan is also a major supplier of assembled circuit boards, including the motherboards used to
make PC and notebook computers. With peak demand looming at year-end, shortages of those
motherboards could hurt PC makers — who have been keeping their inventories of finished
products tighter than ever.
LIMITED IMPACT
Still, some analysts said they expect the long-term impact to be limited, saying any shortfall in
sales will be made up once supplies increase again.
“It doesn't effect the demand for chips, which is what investors pay for,” said Dan Niles, a chip
industry analyst at BancBoston Robertson Stephens.
Tad LaFountain at Needham & Co. says he thinks the supply shortfall will be muted by a drop in
demand for chipsets that go into PC motherboards made in Taiwan.
“Roughly half of all the PC motherboards come out of Taiwan,” he said. “Initially people felt this
would be a boon to semiconductor pricing. As they think about it more, they're going to recognize
it's also going to have impact on consumption.”
The long-term impact may not be fully known until early next year, when chip makers report profits
for the final quarter of 1999, according to Prothro (who said Dallas Semiconductor gets none of its
chips from Taiwan.)
“We'll have to see how may, if any, blame lousy results on this thing,” he said. “On the other hand,
if you're having a bad quarter, this is a Godsend.” |
