-- GartnerGroup's Dataquest Says Semiconductor Industry Feeling the Effect From --
Taiwan Earthquake; Upcoming Dataquest
Semiconductor Conference to Examine Outlook for the Industry
Business Editors and High-Tech Writers
Dataquest Semiconductors '99
SAN JOSE, Calif.--(BUSINESS WIRE)--Sept. 29, 1999--As Taiwanese
companies try to assess the damage from the September 21st 7.9 Richter
Magnitude earthquake, the biggest concern for the semiconductor
industry is the impact this will have on the foundry business,
according to Dataquest Inc., a unit of Gartner Group, Inc. (NYSE:IT).
Taiwan is home to 28 wafer fabs, and Taiwan's fabs account for
more than half of the world's semiconductor contract manufacturing
business and more than 10 percent of the world's silicon area
processing capacity.
"Every day the 28 fabs are out of operation, more than $40
million is lost," said Jim Handy, director and principal analyst for
Dataquest's Memories Worldwide program.
Dataquest analysts said the feedback from contacts they have in
the area is that the main problems right now are regaining power and
replacing the broken quartzware in the fabs. "In many fabs, a large
portion of the furnace tubes and boats have been damaged, and the
breakage has been so widespread that some worry that there is not
enough quartzware capacity worldwide to replace these tools within a
reasonable time," Mr. Handy said. "This could cause many fabs to sit
idle, waiting for this critical equipment."
Dataquest analysts said some input they have received indicates
that although most of the fabs have been designed to withstand far
stronger earthquakes than this one, equipment was not bolted down in
many of the fabs, and there may have been significant equipment
losses.
Although the majority of the semiconductor business in Taiwan is
not dynamic random access memory (DRAM), the earthquake will effect
the DRAM market. Taiwanese manufacturers account for about 6 percent
of the world's DRAM output. The market has experienced a price
increase, and this news should force DRAM prices even higher.
"The DRAM spot market, which before the earthquake was already
responding to other bad news, has seen spot prices double since the
beginning of July," Mr. Handy said. "The Taiwan earthquake has added
fuel to this fire, and we expect to see prices rise above the already
large increases that have occurred since the quake. We do not expect
the current price rise to endure, however, because there is still a
DRAM overcapacity, and the price rise is sure to motivate suppliers to
increase their production."
Other segments within the semiconductor industry are still being
assessed. Programmable logic device (PLD) vendors represent one of the
major customer segments for the foundries. Dataquest analysts said the
leading PLD vendors have said they have sufficient inventories to ride
out any anticipated disruptions at the foundries. Dataquest analysts
said next quarter's revenue is probably unaffected, but there could be
some impact in the first quarter of 2000 as PLD vendors work to refill
the production pipeline.
A detailed analysis of the semiconductor industry will be
presented during the upcoming conference, "Dataquest Semiconductors
'99: Megatrends for the Millennium," November 1-3 in Palm Springs,
California. Dataquest analysts will discuss the trends that will drive
the semiconductor industry over the next five years. More information
on the conference, including a conference agenda, is available on
Dataquest's Web site at
dataquest.com.
This information is produced by Dataquest's Semiconductors
Worldwide program. This program combines the global industry view of
memory, microcomponent, logic/ASIC, analog, discrete, and optical
device segments. Additional information on this program is available
on Dataquest's Web site
www.dataquest.com/public/static/home/ourservices/scopes/n01semiww.html
To subscribe to this program please call 800/419-DATA, or
408/468-8009. More information about Dataquest's programs,
descriptions of recent research reports, and full text of press
releases can be found on the Internet at dataquest.com.
GartnerGroup's Dataquest is the recognized leader in providing
the high-technology and financial communities with market intelligence
for the semiconductor, computer systems and peripherals,
communications, document management, software, and services sectors of
the global information technology industry.
As the world's leading authority on IT, GartnerGroup provides
clients with a wide range of products and services in the areas of IT
advisory services, measurement, research, decision support, analysis,
and consulting. Founded in 1979, with headquarters in Stamford, Conn.,
GartnerGroup is at the center of a global community serving Fortune
1000 clients from 80 locations worldwide. Additional information about
the company is available on the Internet at gartner.com.
--30--JSJ/sf* sdf/sf
CONTACT: GartnerGroup
Tom McCall, 408/468-8312
tom.mccall@gartner.com
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