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Initial Supply Chain Impact from Japan Disasters

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The human, environmental and community-based tolls from last week's tragic, natural disasters continue to unfold; particularly the ongoing problems with the Fukushima Daiichi nuclear power plant.  It will take a while for these most serious and still ongoing tolls to be understood, and for any rebuilding to begin.

One of the many serious problems facing recovery, and impeding progress on many levels, is the lack of power.  While so many people in the northern prefectures are having to brave wintery conditions in addition to their tremendous losses, and becoming ill, the effects of the blackouts reverberate throughout Japan.

On the business side, the severity of power shortages is perhaps one of the greatest impediments to the semiconductor supply chain at this time.  As time has allowed better assessments of the factories and fabs, some positive and some new negative variables are surfacing.

One supply chain positive is that the memory sector is presently believed to be far less severely impacted than initial thought, as reported here by EETimes:

"both Elpida and Renesas each [say] that one of their back-end production facilities that had been knocked out by the earthquake was in the process of restarting. However, even those facilities that did not incur damage must work around rolling blackouts that are expected to be in effect in Tokyo and surrounding prefectures until the end of April."

Alternately, the combined issues of transportation and communication, as pointed out by EETimes, among many others and apparent to the observer, is a serious problem for all aspects of the situation in Japan.  People and rescuers need to have access to information and transportation means, and similarly the ability to move materials, whether business or rescue in nature, is severely hampered (cf. this report).  Not only is there a problem with getting materials to many areas in and around the affected areas, but similarly the movement of goods from those areas is still a concern.  Logistics is a significant barrier to many critical efforts in Japan presently (a thorough status listing is provided by ElectroIQ here and here).

Many factories are restarting operations, as outlined here in PCWorld. However, with aftershocks continuing to disrupt production at many fabs, particularly those located in the north and northeast, it will take time for anything approaching normalcy in the supply chain to resume, as outlined here by iSuppli.

Perhaps one of the most critical supply chain concerns for semiconductors is the question of the availability of "bismaleimide triazine (BT) resin, an epoxy resin used in the packaging of some chips. Nearly all of the world's supply of BT is produced by two Mitsubishi Gas Chemical Inc. plants that were damaged in the quake and remain idle," according to the same EETimes article, but discussed throughout the industry news presently.

While some estimates forecast a 45 day BT supply currently available in the supply chain (cf. this article in EETimes), the fact that the industry relies on few sources for BT resin is a serious concern.  Some reports have other substrates being sourced from Korea and China, but at this time it is difficult to verify exactly what the situation is, and therefore what resolution of the problem may be.  Intel and Qualcomm, are reporting their multi-sourcing strategies are in place and their customers will not experience problems, as reported here by Bloomberg. Nanya and Adata have also reported no anticipated disruption in supply due to sourcing strategies in place for upstream materials, as reported by DigiTimes on 3-18-11.

Overall, as we move into April the supply chain effects of the disasters in Japan will begin to be felt more clearly.  Simultaneously, innovative solutions by various businesses are in the works and shifts along the semiconductor value chain are likely (cf. this report regarding TSMC's and this report regarding Sony's search for new suppliers).

Beginning next week, Smith MarketWatch will be providing more frequent updates and resources to monitor the supply chain situation, now that more reliable information has begun to emerge.


Lisa Ann Cairns, Ph.D.
Written on Saturday, 19 March 2011 22:30 by Lisa Ann Cairns, Ph.D.

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