*****TAIWAN UPDATE - MUST READ*****
Here is the latest. The earthquake in TW will have not material affect on 3@ which ends next thursday. secondly, read the 1st account rpt. from WDR. everything should be running fine soon.
cheers
p.s. i re-mortgaged my house to purchase 80 contracts of PMCS=:)
WDR: EARTHQUAKE COMMENTARY FROM ANALYST TEAM IN TAIWANSUMMARY:
We have received comments from our analyst team in Taiwan that discuss the
impact of the earthquake on the Taiwan tech industry - namely PC motherboards,
foundries, TFT-LCD, DRAM and other components. Generally speaking, there does
not appear to be major property damage caused by the earthquake for most of
electronics companies located outside of central Taiwan. Still, the quake will
clearly disrupt the tech industry's supply chain - how much remains unclear, but
in this note we attempt to shed some light on the extent of the disruption to
the different areas of Taiwan's tech industry.HIGHLIGHTS:
* For PC system and peripheral companies, property damage looks very limited.
The only loss will likely come from production disruption due to power outage.
As most of PC system and peripheral companies work on a 6 days per week basis,
most of companies believe they can make up their shipments target by working
overtime once the power supply is back to normal.
* For the mid-to-downstream PC industry: PC vendors may be able shift some
orders to other countries, particularly to Korea. The second-tier Taiwanese
companies may be more squeezed than companies with more diversified production
plants, who are more positioned to keep orders
* Motherboard/PC companies are less adversely affected during the earthquakes
for three reasons: (1) the majority of their plants are located in the northern
part of Taiwan (except for USI), (2) they are not capital (equipment) intensive
businesses, (3) some (such as Acer) have overseas operation plants.
Nevertheless, we believe the insufficient supply from Taiwanese CPU chipset
companies may prove to be a bottleneck for PC manufacturing due to the hit on
Taiwanese foundry companies' components. We estimate September sales for
motherboard/PC companies will be negatively affected by about 10%.
* Taiwanese Components (power supply, connectors, PCB, passives) and
Peripherals appear relatively well positioned as they rely fairly heavily on
overseas operations.
* TFT-LCD: Not severely impacted because (1) most TFT-LCD companies were not
running at full capacity and (2) production cycle is shorter than for
semiconductor companies. However, TFT-LCD companies' semiconductor business will
be negatively impacted.
* Semiconductor companies and foundries: power outage will likely cause a big
loss since they were running at full capacity. For most, production is expected
to resume on Monday which leaves damage for most semiconductor companies at
about 5-7 days of daily revenues. However, production ramp may be slower than
normal, which could lead to more loss.
* DRAM companies: From the initial assessment, it appears that the damage is
limited to loss in production. There has been no reported damage in the
structure of the clean rooms, but there were some reports of minor building
damages for a few DRAM manufacturers. Nevertheless, we believe the earthquake
will result in a short-term supply disruption for the DRAM makers which should
continue to support DRAM spot prices.
* Conclusion: We believe the electronics sector is the one hit the hardest
compared to the major sectors in Taiwan. Among the Taiwan electronics sector,
semiconductor (foundry and DRAM) will likely have the worse damage. On average,
semiconductor companies will lose 5-7 days of daily turnover if the power supply
is back on next Monday. PC system and peripheral companies will have less damage
for some 2-3 days of daily revenues. The mid-term impact of components shortage,
however, may disrupt the production for the whole Q4.ANALYSIS:
Central Taiwan was hit the hardest: two major technology companies are located
there. USI a PC motherboard assembler for IBM reported no major facility
damage, and Siliconware which reported a minor disruption on production lines
should be back to normal production over the next few days.Power supply:
The latest update on industrial power supply is that there are 152 strategic
users that will receive 24-hour power supply starting next Monday (Sept/27).
While TaiPower can not disclose the list of 152 strategic users, we believe most
of the semiconductor companies belong to this list. The overall power supply is
not likely to be back to normal for another two to three weeks.
Components supply:
This is the biggest worry for the PC system makers. Several PC system companies
indicated that although most of them have inventory of 2 to 3 weeks, they
believe the components shortage will become even worse which may disrupt their
production in October if components production can not be back to normal over
the next two weeks.Summary for the mid-to-downstream PC industry
Generally, the direct loss incurred to each company is probably about 2-3 day's
revenues. The potential loss will largely depend on when the power can resume.
In the short term, we believe the second-tier companies are more squeezed given
the tightening supply of components for all PC chain. In the long term, there
is some chance for PC vendors to shift some orders to other countries,
particularly to Korea, to reduce the country risks. Therefore, we believe
companies which have more diversified production plants, are more positioned to
keep orders.Summary for the Motherboards/PC Companies
Motherboard/PC companies are less adversely affected during the earthquakes for
three reasons:
1. the majority of their plants are located in the northern part of Taiwan
except for USI (2350).2. they are not capital (equipment) intensive business.
3. some ( such as Acer) have overseas operation plants.
The direct losses during the earthquakes are limited. When the power can
recover is the key factor for their September revenues and profits as they were
running at full capacity. However, some are worried about the supply of key
components. Nevertheless, we believe the insufficient supply from Taiwanese CPU
chipset companies will be the only bottleneck for PC manufacturing caused by the
earthquakes starting from October due to the hit on Taiwanese foundry companies.
We estimate September sales for motherboard/PC companies will be negatively
affected by about 10%. In October, sales for motherboard/desktop PC companies
will significantly depend on whether Intel can supply enough CPU chip sets to
net off the gap.
Summary for Components Companies (power supply, connector, PCB, passive
components)
They are better positioned than most of Taiwanese technology companies as they
heavily rely on their overseas operations, particularly in China. Moreover,
some companies, which have facilities in the southern part of Taiwan, such as
WUS and Yageo, are not affected by power outage.
Summary for Peripherals/CD-ROM Companies
Acer Peripherals is less affected as over 70% of their production is allocated
in Malaysia and China. Regarded with CD-R companies, although direct losses
incurred to them are not significant, the potential impact on them mainly
depends on when power can resume as they were running at full capacity.
Summary for TFT-LCD and Semiconductor companies
TFT-LCD companies are negatively impacted as the operation process is partly
involved in semiconductor manufacturing. However, as they only started mass
production in mid-1999, they are still going through the learning curve without
running at the full capacity. In addition, the impacts on these companies are
much less than semiconductor companies as the production cycle for TFT-LCD
panels is 2-3 weeks, much shorter than 40 days for semiconductor products.
Semiconductor companies reported no property damage either. Nonetheless, power
outage will likely cause big losses to all the semiconductor companies. While
all semiconductor companies have back-up power to various degrees, most of them
can only support the function of clean room. Production is not expected to start
again until next Monday (Sept/27). As a result, the damage for most of the
semiconductor companies will be about 5-7 days of daily revenues.
Summary for foundry companies
Both TSMC and UMC made public announcements with little impact on production
facilities. TSMC, however, given its largest operational scale, may report the
highest amount of damage in absolute terms which we estimate to be 5-7 days of
daily turnover. One thing we'd like to point out is TSMC is famous for its mini-
clean room (SMIF) facilities. Work-in-process wafers which are kept in the SMIF
boxes should be relatively safe. Therefore, TSMC's damage on WIP should be less
than that of its competitors in terms of percentage of sales.
Summary for Taiwan DRAM makers
From the initial assessment, it appears that the damage is limited to loss in
production. There has been no reported damage in the structure of the clean
rooms, but there were some report of minor building damages for few DRAM
manufacturers.
For Mosel Vitelic, the company reported no damage to its clean room, only minor
damage of approximately NT$5m to its building. Due to disruption in power,
Mosel is estimating loss in sales of NT$120m (6 days of daily revenues) and loss
in earnings of NT$224m (due to the impact from ProMos). However, it is likely
that insurance will cover the losses, but no detail is yet available.
For Winbond, aided by its UPS (un-interruptable power supply) system, 80% of
its electricity need is currently back on line. Its IC testing facilities has
been tested and is currently operational. In terms of its fabs, Fab I (5-inch)
and Fab III (8-inch) are expected to be up and running by next Tuesday, 28th
September. For its Fab II, there maybe an additional delay of 1 to 2 days. The
company estimates that its loss will equate to 3 days of sales in September
(NT$200m) and 2 days of sales in October (NT$140m). For damaged wafers, most of
the loss will be covered by the insurance. For the portion not covered by
insurance, the company will recognise only a minor NT$20m loss.
For Powerchip, the company believes that the damage will be limited to loss in
sales of approximately one and a half weeks, or approximately NT$275m. There is
no structural damage to its facilities. The company indicated that their
insurance should be able to cover any losses resulting from damaged wafers. As
the company has been accumulating some inventory in recent weeks in anticipation
of the rise in 64M DRAM spot price, Powerchip should partially benefit from
their inventory position, although the company did not disclose the amount of
their inventory. |
