Date: 24/03/2011

Semiconductor industry supply chain spike; status of key companies

Earthquake of magnitude 9.0 and a 23 Meter tall Tsunami hitting Japan coasts on 11th Mar 2011 triggered quite a spike in global semiconductor supply chain. The spike-arrester here is the buffer-stock usually volume manufacturers keep in their inventory lasting few months. Longer the inventory last, better is the protection against this spike. No smart company will take the risk of not having enough inventory for months. But the real problem begins if they fail to replenish the stock before the stocks go dry. Actually there is one more extension they may get if the supplier has enough in stock. So there is couple of protections against immediate problems for the companies with proper inventory management. But the many of the companies have a policy of not stocking enough components to reduce operational cost; those kind of extra-smart companies will run into problems.

It all depends how critical is the component/material. How much of alternate suppliers you can find with in the short time. In some cases such as commoditized semiconductor devices finding an alternate is easier but the challenge is finding the component exactly matching the part in shortage, otherwise re-design is costlier. Experienced manufacturers always keep the alternate design in such cases. It all depends on how well they have planned for material shortages.

The semiconductor chips and electronic component market will have less direct impact but will be affected in coming months due to delays in production of chips mainly, fables companies depending on the foundries, who in turn depend on Japanese silicon, equipment and other material suppliers for the foundry. So the direct risk is more in semiconductor equipment and electronic material supply chain. Japan has a huge base of such suppliers, in some cases Japan contribute 40-60% of the global market, good example is semiconductor wafer, mainly 300mm silicon wafer.

In any of the key material or finished product Japan's share is generally above 20%.

The question here is, does the suppliers in U.S. Europe, South Korea and elsewhere has enough capacities to take on the load?

The answer is partly Yes, because the problem can only last utmost for a month or in worst another few weeks. But the issue is about startup and SMEs. The alternate supplier will not be eager in taking the additional load without charging the premium and startups and SMEs may be not able to compete with large-scale companies and pushed to the end of the Q.

Finally the industry as a whole will be affected by this disaster, but the affect may result in both negative and positive effect, and surely not a long one, as said above just a spike with timing (not the duration but the occurrence) and amplitude variation (+/-). The spike may even take the shape of jitter signal.

Here we list some of the latest announcements (as of 24th Mar 2011) made by the Japanese and other leading electronic companies around world. Please click the text below to read the consolidated announcements.

Semiconductor and electronic companies status 24th Mar 2011