El-- This makes it sound like 2 weeks or 2 months depending on who your supplier is and where they are located;
Sep. 24, 1999 (Electronic Buyers News - CMP via COMTEX) -- The massive
earthquake that hit Taiwan last week sent tremors throughout the global
electronics supply chain, raising fears that component prices will rise
and many parts will go on allocation in an already tight market.
Taiwan, home to leading chip suppliers and foundries, dozens of
chipset and motherboard makers, and many assemblers and
passive-component companies, experienced widespread power losses
throughout the island, and it could take another week to 10 days before
volume production is back at many of these sites, according to
companies and analysts.
This could result in as much as $1 billion in lost revenue, and send
fabless chip suppliers and OEMs scrambling to secure capacity in an
environment of extremely low inventories and shortages in several key
component segments.
"It looks far worse than what companies are saying about the
damage,' said analyst Danny Lam, a principal at Fisher-Holstein Inc.
"Worldwide allocation [of Taiwan-made products] is inevitable.'
The Taiwanese government estimates that chip makers could lose more
than $63 million a day due to production shutdowns.
And it could take no less than two months before foundries reach
their pre-earthquake production levels, said Jim Feldhan, president of
Semico Research Corp., Phoenix.
The earthquake, which struck shortly before 2 a.m. local time Tuesday
about 60 miles outside of the Hsinchu Science-based Industrial Park,
has already been blamed for at least 2,100 deaths. The quake and
several aftershocks left hundreds of electronics component and systems
vendors with little more than emergency backup power to sustain key
manufacturing equipment.
The country's leading manufacturers initially tried to downplay the
effects of the earthquake on the industry, given that Taiwan's primary
semiconductor-manufacturing center in Hsinchu is far from the quake's
epicenter. But while most plants were left unscathed physically, the
power outages crippled production. That, coupled with damage done to
the country's customs operations, has prompted even the most optimistic
of companies to acknowledge that some supplies could be be lost for
days.
The government-owned Taiwan Power Co. (Taipower) had pledged to
restore power in Hsinchu, home to most of the country's biggest fabs,
by Monday, Sept. 27, but not before power was back up in residential
areas and hospitals.
To resolve the problem, Taipower is laying a new power line between
the northern and southern parts of the island, according to D.C. Chen,
president of Information Interchange Inc., a market research
organization in San Jose. "But this could take two more weeks," Chen
said.
As a result, local companies are at the mercy of Taipower, which has
come under fire over the past several years for what has seemed like an
endless stream of blackouts.
"What happens now depends upon Taipower,' said Tom Sullivan, vice
president of sales for Winbond Electronics Corp.'s U.S. subsidiary,
based in San Jose. Hsinchu-based Winbond, Taiwan's largest supplier of
SRAMs and other products, also builds 64- and 128-Mbit DRAMs on a
foundry basis for Japan's Toshiba Corp.
Update from Hsinchu
As of last week, Winbond's fabs were not in operation, and Sullivan
couldn't say when the company would reopen. In the meantime, Winbond
has activated what it calls "task teams" to work with customers in the
United States. The teams are designed to give customers timely
information about the status of their product shipments and other vital
information, Sullivan added.
Elsewhere in Hsinchu:
- Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world's
largest chip foundry, said its fabs will be back in production a week
after power is restored.
A spokesman for TSMC USA in San Jose said the company is working with
government officials in Taiwan to distribute power once two nuclear
power plants on the island are restarted, which was scheduled for last
Thursday. The company said it had partially restored power to about 10%
to 20% of normal operational levels-just enough power for it to assess
any damage and in-process wafer loss.
TSMC also formed a special task force to keep its customers apprised
at least daily on the status of their wafer lots. The spokesman was
unable to estimate when TSMC's power would be fully restored, but he
said minimal power levels have allowed the foundry to begin making
preliminary assessments of damage and in-process wafer loss.
- United Microelectronics Corp. (UMC), another major foundry, said
there is no serious damage to its fabs, other than damage in the quartz
furnace tube equipment. UMC, which is running its buildings on backup
power systems, can't test its fab lines for functionality until the
main electrical power returns, according to Jim Kupec of UMC's U.S.
operations, based in Sunnyvale, Calif.
"We are still assessing the impact to September output," Kupec said.
- Macronix International Co. Ltd., Taiwan's largest supplier of mask
ROMs, EPROMs, flash memories, and other chips, also makes ICs on a
foundry basis for Nintendo Co. Ltd., which sole-sources Macronix's
family of 64- and 256-bit mask-ROM chips for its popular game machines.
Macronix officials claim the earthquake will have little impact on
customer shipments. However, its fabs lost power after the quake but
are now operating with the help of a backup generator. "The earthquake
is a blow for Taiwan, but we don't think it will have a significant
disruption for our business,' said K.C. Shekar, director of strategic
marketing for Macronix' U.S. subsidiary in San Jose.
- Worldwide Semiconductor Manufacturing Corp. (WSMC), was also
operating via back-up generator until another disaster struck. Last
Wednesday, one of WSMC's backup generators caught fire due to
overheating. The fire was extinguished within an hour, but caused $630,
000 worth of damage.
The fire did not hit the clean room in the fab, said a spokesman for
WSMC, a dedicated foundry company that makes logic and memory chips,
primarily for Fujitsu, Toshiba, and other chip suppliers.
The power outages could cost these companies as much as $3 million a
day per fab, said Dan Hutcheson, president of VLSI Research Inc., San
Jose. He estimated that a company such as TSMC, with six fabs, could
stand to lose some $65 million to $70 million in a four-day shutdown.
He added that there could be huge losses from damage to wafers that
were in-process when the earthquake hit.
"At any point in time, there are about 80,000 wafers running in a
state-of-the art fab, with a total value of some $250 million," he
said.
A tour by EBN of several fabs at the Hsinchu Science Park found that
little or no damage was done to any of the buildings in the
megacomplex. But fab officials interviewed here said it could take days
to evaluate fab safety and equipment.
Privately, executives were concerned that ultrasensitive lithography
optics and exposure tools may have been thrown out of alignment. Some
said track systems may need to be readjusted. Furnace and deposition
tools could be affected as well. Entire lines must be calibrated again
and requalified.
Elsewhere in Taiwan
Chip makers outside Hsinchu appeared more fortunate, although they
weren't all trouble-free.
Nanya Technology Corp., one of the island's largest merchant DRAM
makers, claimed to be up and running, with minimal damage, as of
Wednesday. Nanya is situated in Taoyuan, just outside Taipei. The
company uses its own power generators, rather than those from Taipower,
said Ken Hurley, president of the company's U.S. subsidiary in San
Jose.
Chipset maker Via Technologies Inc., based in Taipei, reported little
damage at its facility. But Jonathan Chang, director of operations and
sales for the company's U.S. operations, said there was concern about
Via's foundry partners, TSMC and Advanced Semiconductor Engineering
Inc. (ASE). ASE is Taiwan's largest test and assembly house.
Another chipset supplier, Acer Laboratories Inc., "basically didn't
suffer significant damage" at its building in Taipei, said Nancy
Hartsoch, director of sales and marketing. "But we don't have a good
accounting on shipments from foundries." Acer's two foundries are TSMC
and UMC, and Hartsoch said it could be days before the company can
assess how the power outage will affect ALI's own contracted wafer
supply.
Electronics companies outside of the semiconductor sector generally
reported little effect on their business from the earthquake, although
most have had to deal with power outages and some interruptions in
shipping.
Nan Ya Plastics Corp., one of the island's largest
printed-circuit-board makers, was reportedly up and running late last
week. The company makes PCBs for several major OEMs, including Intel.
Nan Ya Plastics makes use of its sister company, Nanya Technology's,
power generator.
The earthquake also did not appear to affect Q-Run Technology Corp.,
a small PC assembly house that is building a line of low-end PCs for
Compaq Computer Corp. Q-Run is a subsidiary of Taiwan connector giant
Hon Hai Precision Industry Co. Ltd.
Passive-component picture
It's too soon to tell what impact the earthquake will have on passive
components, according to leading suppliers with operations in Taiwan.
Those suppliers include passives makers AVX Corp. and Philips
Components; connector maker Hon Hai Precision Industry Co.; resistor
makers Kamaya Inc. and Yageo Corp.; and power-supply makers Delta
Products Corp. and Acbel Polytech Inc.
"Frankly, it's too early for us to get a handle on the situation in
Taiwan," said Craig Hunter, strategic marketing manager at AVX, Myrtle
Beach, S.C. About 5% of AVX's total sales come from Taiwan, he said.
AVX manufactures magnetic devices, such as ferrites, at its plant in
the Hsinchu Science Park, Hunter said.
Kamaya Inc., a subsidiary of Mitsubishi Materials Corp., produces
about 300 million resistors per month in Taiwan, said Takashi Takasawa,
vice president of Kamaya, Fort Wayne, Ind. He noted that the company
manufactures thick-film chip resistors in Malaysia, so even though lead
times are tightening for these devices, the earthquake shouldn't affect
them further, he said.
NIC Components Corp., a passives-component supplier based in
Melville, N.Y., outsources some manufacturing to plants in Taipei. Some
of those facilities lost power and could experience a week to 10 days
of downtime, said company president Richard Schuster. The company's
supply of ceramic and film capacitors will most likely be affected, he
said.
The disruption comes at a critical time for passive-component makers.
Lead times for tantalum capacitors have reached 20 weeks, while lead
times for small -0402 and -0603 ceramic capacitors is 14 to 15 weeks,
Schuster said.
Philips Components, a major supplier of multilayer-ceramic
capacitors, has a key manufacturing plant in Kaohsiung, far from the
epicenter, and was unaffected by the earthquake, said Jan Konijnenberg,
product group manager for Philips Components Advanced Ceramics and
Modules, San Jose. "I'm not aware of any real issue whatsoever with our
operations in Taiwan," he said. The company also has a ferrite plant in
Taiwan, which was also unaffected. "Everything is operational, and
there was only a temporary power outage," he said.
Taiwan is also the world's largest producer of power supplies. But
since power-supply makers haven't experienced any lead-time problems,
the earthquake shouldn't have too much impact on this market, said
analyst Mohan Mankikar of Micro-Tech Consultants Inc., Santa Rosa,
Calif..
Distributors voice concerns
Some of the industry's leading distributors were busy trying to
assess damages, both at facilities in Taiwan and at their leading
suppliers there.
"We just learned yesterday that all of our 250 employees in Taiwan
are safe, and that there's no damage to our buildings," said Stephen
Kaufman, president and chief executive of Arrow Electronics Inc.,
Melville, N.Y.
In terms of impact to the supply chain, Kaufman said, "We may lose a
week or two [worth of production], but I don't expect to see anything
massively disruptive to the supply chain."
For now, Arrow is telling its customers to "wait and see." Kaufman
anticipates there will be some panic buying among OEMs as a result of
the uncertainty, and indicated Arrow is in a position to fulfill the
extra demand.
"The situation is quite severe," said Roy Vallee, chairman and chief
executive of Avnet Inc., Phoenix. "It seems to me that there must be a
negative impact," although he added that the extent is impossible to
(COMTEX) B: Turmoil In Taiwan -- Global supply chain at risk
B: Turmoil In Taiwan -- Global supply chain at risk
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