Addition to Taiwan issue....
Taiwan quake could
disrupt computer,
chip markets
By Brooke Crothers and Stephen Shankland
Staff Writers, CNET News.com
September 21, 1999, 5:00 p.m. PT
update The huge earthquake in Taiwan
could disrupt crucial segments of the
high-tech industry, underscoring the
country's importance as a major world
base for computer and chip production.
The estimates of delays from earthquake
damage and power outages range from a few days to weeks, but a ripple
effect of some degree appears certain. The quake registered 7.6 on the
Richter scale, with an epicenter some 145 kilometers south of Taipei.
In the last decade, Taiwan has become the hub for computer production
worldwide and major base for chip manufacture. Compaq Computer,
IBM, Hewlett-Packard, Dell Computer, Gateway, Toshiba, Fujitsu, and
just about every other large computer manufacturer consign notebook
and desktop PC production to Taiwanese companies. Also, Hsinchu
Science Park commands more than 10 percent of worldwide production
of certain types of chips, including those used for memory and graphics.
Right now, computer manufacturers are trying to assess the gravity of
the situation, though initial reports say damage is not massive.
"We really don't know [about damage]. We're just trying to confirm the
safety of our engineering and sales staff," said a spokesperson at Dell,
which commissions production of notebooks to Taiwanese companies.
Dell has assembled a team to talk to suppliers, he said.
Although Hewlett-Packard has accounted for all but two of its 1,500
employees in Taiwan, communications
remain difficult, spokeswoman Anne
McGrath said. "At this point, all our
offices in Taiwan are closed because
there's a power outage throughout the
country," she said. HP has sales,
support, marketing, and procurement
offices in three locations in
Taiwan--Chungli, Taichung, and
Kaohsiung.
The quake could hurt supplies of
notebook computers, said International
Data Corporation analyst Randy Giusto.
About 40 percent of all notebooks are
made in Taiwan, he said, and even if
manufacturers aren't affected, there still
are supply questions with the smaller
manufacturers of the myriad components
that go into the computers.
Although details still are sketchy,
computer companies have told Giusto that the factories of the two
largest notebook manufacturers, Compal and Quanta, are unscathed.
However, they don't have power and their generators have only enough
fuel to last three days, he said.
Taiwan Semiconductor Manufacturing Company, one of the country's
largest chipmakers, fared relatively well. "There was no loss of life and
buildings are in good shape," said Magnus Ryde, president of TSMC
North America. The company makes graphics processors and chips for
networking and wireless products and is a large maker of chipsets, one
of the core semiconductor components in a PC.
Back-up power systems came online, Ryde said, "but you can't run a
factory on back-up for very long." He said power was still out based on
the most recent information he had.
On a more ominous note, he said that "there is some damage to
equipment at wafer [plants]. We already factored in a loss of wafers. This
is very preliminary but output loss for this month may be 10 percent."
Wafers are the building blocks of semiconductor chips. Ryde speculated
that some production equipment may have to be "realigned," a process
that can take days.
The potential for a disruption when such a big chunk of worldwide
personal computer assembly and component production is concentrated
in one place is great. "This clearly has a major impact on semiconductor
production because of all the foundry work done there," said Nathan
Brookwood, an analyst at Insight 64.
"These guys also make a lot of motherboards. A lot of what's in
process right now is targeted for the fourth quarter and could be
very detrimental for the world," he added. Taiwanese companies
make the lion's share of the PC's main circuit board, called a
motherboard.
"It will ripple through the whole supply chain," TSMC's Ryde said.
For example, he said, customers who rely on TSMC for graphics
chips may not be able to get them immediately.
Ryde also pointed out that the current power outage is much
more serious than the one Taiwan experienced in July. That
blackout caused memory chip prices to rise, according to
analysts, boding ill for stable chip pricing in the future.
But Wall Street analysts are leaning toward caution rather than
alarm. "We detected a distinct undertone of 'this is probably
closer to a blip than a major supply problem,' and that's our guess
as to how it will come out," said J.P. Morgan Securities analyst
Terry Ragsdale in a bulletin.
"Taiwan has had a few power disruptions already this year, and
stopping a fab even for a few minutes generally is not a pleasant
thing, but the impact on production has been minimal. An
earthquake admittedly is a more serious event, but it is too early
to assume the worst," he added.
"Our guess is that the Taiwanese earthquake will just make the
current tightening supply-demand situation in the semiconductor
industry a little bit tighter--and OEM purchasing managers even a
bit more eager to build some inventory--but that the impact will be
a few days of lost production rather than a serious problem for the
Christmas selling season."
But the worst-case scenario could mean a disruption for weeks,
according to Danny Lam, a principal at Fisher-Holstein. He said if
power is discontinued to semiconductor equipment used to
"bake" chips, for instance, disruption could be substantial
because this requires the dispatch of special teams from
manufacturers to fix the problem, which can sometimes take
weeks.
"Very best case is a few days. Worst case is a week to a
month," he said.
Other manufacturers appear to have not sustained significant
damage. Fujitsu said one of its telecommunications plants was
affected by power outages, but that there was no apparent
damage to the facility, according to a report in the Nihon Keizai
Shimbun, a Japanese business daily.
Sony said there was no damage to a plant near Taipei that
manufactures consumer electronics devices, though there were
power outages, according to that report.
Toy |
