IC supply-chain returns to normal, but chip executives fear prolonged slump
By Mark LaPedus
Semiconductor Business News
(09/17/01 19:07 p.m. EST)
SAN JOSE -- The supply-chain appears to be getting back to normal after last week's terrorist attacks in the United States, but chip executives now fear that the tragic events could prolong the slump in the worldwide IC business.
Already hit hard by the current downturn in the IC industry, chip makers and system manufacturers were hoping for somewhat improved business conditions by at least the fourth quarter of 2001.
But last week's terrorist attacks in New York, Washington D.C. and Pennsylvania may have shattered consumer confidence and spending for the holiday season, thereby pushing out any possible demand for PCs, cellular phones, and other products until the first half of 2002--or beyond.
On Monday, the technology sector was hit hard along with the rest of the stock market on the first day of trading since last week's terrorist attacks. The Philadelphia Semiconductor Index closed down almost 9%, the Nasdaq exchange was down almost 7%, and the Dow Jones Industrial Average fell nearly 7% and closed below 9,000 for the first time in two-and-a-half years. The Dow's 684 point decline was its biggest one-day drop ever.
Right now, chip executives are bracing for the worst. "It will be awhile before we know about the impact of last week's events," said James Ellis, president and chief executive of the U.S. subsidiary of Wacker Siltronic Corp., based in Portland, Ore. Germany's Wacker Siltronic AG is one of the world's largest suppliers of blank silicon wafers for 200- and 300-mm fabs.
"A lot of that will depend upon the mood of the consumer," Ellis said in a telephone interview with SBN.
"We will wait and see," added Miin Wu, president of Taiwan's Macronix International Co. Ltd. of Hsinchu, Taiwan. "However, the future depends upon U.S. intention and wisdom in terms of a retaliation [against the terrorists]," Wu said.
Others are already worried about consumer demand in the wake of last week's events. "Short term, I don't see any impact in the market," said Tatsuya Iida, senior vice president of marketing for Elpida Memory USA Inc. The Santa Clara, Calif.-based company is the U.S. subsidiary of Elpida, the joint DRAM venture between Japan's Hitachi Ltd. and NEC Corp.
"Long term, I am worried about demand [for DRAMs and other chips]," Iida said. "I am worried that the demand will continue to go down," he said.
"The mood in the market is down," said Richard Brown, director of marketing for Taiwan's Via Technologies Inc. Taipei-based Via is one of the world's largest suppliers of PC chip sets and other products.
"I think [last week's events] will have a dampening effect on the market," Brown said. "The last thing people want to do is to buy a PC."
Fortunately, however, the semiconductor supply-chain is returning to normal after a week of shutdowns and uncertainty. As reported, most air flights--which provide the bulk of worldwide chip shipments--were grounded for the most part last week. Both passenger and cargo flights resumed on Friday.
But still, on top of the terrorist attacks in the United States last week, Taiwan was hit by one of the world's worst typhoons on Monday and Tuesday. Many Taiwanese chip makers shut down their operations on Monday and Tuesday, but they expect to resume normal product shipments by Wednesday.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world's largest silicon foundry provider, was open for business and processing wafers in spite of the typhoon. The company's operations were running "smoothly," according to a spokesman for the Hsinchu-based company.
"I think things will become normal by the end of the week [in Taiwan]," Via's Brown said.
Meanwhile, there are still some issues with the supply chain. Some companies, including Advanced Micro Devices Inc., have been forced to switch their transport strategies by shifting their goods from passenger to more expensive cargo flights--a move that could impact the bottom line.
Others are also impacted. "The delivery of our product to the States is on schedule, due to the change of carrier in the last week," said Thomas Chang, a vice president at Taiwanese chip maker Mosel-Vitelic Inc.
"We are shipping products to the States by UPS [United Parcel Service] for the moment," said Thomas Chang, a vice president at Taiwan's Mosel-Vitelic Inc. "The cost of using UPS for component shipment is more expensive than the forwarder which is used by Mosel-Vitelic," Chang said
Elpida began shipping product on Saturday after being grounded in the U.S. market since last Tuesday. "We just started shipping our products on Saturday to our [U.S.] customers," said Elpida's Iida. "I have not heard that this has impacted our customers," he said.
There was little or no impact on Macronix, Taiwan's leading supplier of EPROMs, flash memories, ROMs, and other products. "We saw no change except a small impact from flight delays," Wu said. "We've already caught up with our shipments," he said.
"It looks like the industry is returning to normal," Wacker's Ellis said. "We've been shipping products."
For the most part, Wacker was not impacted by last week's events. The company had shut its U.S. manufacturing plants down last week, as part of a previously announced plan to reduce its production costs amid the current IC downturn.
Wacker was able to ship products from its inventories to customers during the plant shutdown, but there were some tense moments. The company obtains its raw materials from Europe, which must be transported via air freight.
"We still have enough inventory for September,' he said. "But some of our competitors had some problems [in terms of air transportation], especially with their just-in-time customers," he added. |
