Chip makers and the computer and electronic suppliers that depend on them are only now beginning to sort out the effect that the earthquake and tsunami disaster in Japan will have on their businesses.
At the moment, the disaster has not caused huge supply problems for the makers of key processor, graphics card, and memory components. But depending on the damage at a number of key Japanese facilities, there could be hiccups in the chip supply chain down the road in the near term and perhaps for a longer period of time.
Dean McCarron, principal at chip watcher Mercury Research, says that just such a glitch brought down the nascent chip business in the late 1970s, and it is probably the reason chip makers like to second or third source their raw materials. Without knowing it, all the chip makers bought diamond-tipped saws to slice their silicon ingots into wafers from the same company. And this company, as it turns out, was an intrepid fellow working in his garage. When he got sick, there were no more saws and it actually interrupted global chip supplies.
"There's not an immediate impact on manufacturers like Intel and AMD," says McCarron. "But a lot of ingredients do come out of Japan." These include deep ultraviolet stepping equipment, which is used to etch chips. Delays in shipments of such big and expensive pieces of equipment, which take a long time to make, don't affect chip production today, but could cause roadmaps at wafer bakers to shift down the road depending on when equipment is available.
McCarron says that the ceramics and plastics that are used to wrap up chips to stick them into devices might be more of a concern in the near-term. "And a run on these components will deplete the inventory much more quickly, too," he adds, echoing the thoughts of supply chain managers the world over.
A report just released by chip tracker IHS iSuppli says that its checks in Japan indicate that Shin-Etsu Chemical's silicon wafer production plant in Shirakawa, which accounts for 20 per cent of worldwide wafer production with its 300mm silicon ingot growing and wafer slicing facility, is offline.
MEMC Electronic Materials, which supplies another 5 per cent of wafers from its Utsunomiya factory. The Shin-Etsu plant makes wafers that are, according to iSuppli, used mainly to make DRAM and flash memory; the company is working to set up production at another facility and has not said how long it will take to get the wafer bakers up and running.
About 40 per cent of the wafer production at the Renesas Electronics plant in Tsugaru, which makes analog and discrete devices, is offline, and half of the wafer capacity at Fujitsu's chip fab will be offline for the next three to four weeks not because of damage to the facility, but because of rolling brownouts and shortages of wafers. Elpida Memory says that damage at its Yamagata plant, and the lack of electricity, has knocked production in half, too.
iSuppli says in another report from late last week that whenever an earthquake is above a 5.0 on the Richter scale, the chip making gear is supposed to shut down. The aftershocks were large enough to shut down production in many of the 130 semi fabs in 53 locations around Japan all last week, even if they did not sustain damage from the initial 9.0 quake or the following tsunami.
Linley Gwennap, the principal researcher at chip watcher The Linley Group, tells El Reg that the impact from the quake and tsunami is still being assessed, but as a matter of course in normal business operations, companies in the chip business make extra ingots, slice extra wafers, and stockpile them. "There is enough slack in the system that things shouldn't be impacted in the near term," Gwennap explains. If you lose 25 per cent of wafer capacity for a few weeks, this is on the order of about one per cent of worldwide output for the year. "I think that is pretty manageable."
If the electrical power and nuclear reactor issues take months, not weeks, to resolve, then this might be another story, Gwennap adds.
The good news, if there is any, is that as 2010 came to a close semiconductor inventories were at a high that has not been seen for two and a half years, according to iSuppli. That supply should cushion panic buying of electronic components somewhat. But spot prices were rising last week and probably won't settle down until the extent of the damage and the supply-demand issues sort themselves out.
Perhaps more disturbing than having 25 per cent of worldwide wafer capacity offline is that Mitsubishi Gas Chemical and Hitachi Kasei Polymer, have stopped production of copper-clad laminate (CCL), a raw material used in the making of printed circuit boards. These companies, which account for 70 per cent of CCL, have said they plan to have production of CCL rolling again in two weeks. iSuppli estimates that there are enough raw printed circuit boards and enough CCL in stock to tide electronics and computer makers over for several weeks.
So how has the Japanese quake and tsunami affected the major suppliers of processors and memory used in the data centers and on our desktops? So far, not much, and few of the chip makers that El Reg spoke to were willing to stick their necks out and make any predictions.
Intel makes its Xeon, Core, and Itanium processors in the United States, Ireland, and Israel, and does assembly and testing of the final chip packages in Vietnam, China, Costa Rica, and a number of other places. So chip production at Intel has not been directly affected by the disaster, since none of these operations are in Japan.
But Intel does not make its own silicon ingots - they look like glassy salamis - and it also does not slice its own wafers. The Intel spokesperson says that Intel sources its wafers from multiple suppliers, as it does most materials. That way, a single disaster that wipes out a component used in its products can't completely halt production. Fabs lose an enormous amount of money just sitting there, idle.
"We are closely monitoring the supply chain," an Intel spokesperson tells El Reg. "Preliminary assessments are relatively positive from our direct suppliers, whom we currently believe came through this event in reasonable shape. Challenges in power and transportation infrastructure are evolving and we continue to monitor and interpret the implications to our suppliers. However, we have seen nothing that would prevent us from continuing to meet our commitments to our customers."
Advanced Micro Devices no longer has its own fabs, but its partners Global Foundries (which makes its Opteron processors) and TSMC (which makes its graphics cards and some of its client processors) could face some component issues. But nothing has hit yet. Like Intel, Global Foundries buys its silicon wafers from third parties.
"As far as we know, there is no effect on us," says Vlad Rozanovich, director of the enterprise and public sector business at AMD, who was meeting El Reg today to talk about server chips and clouds. "At this point, we have not seen any effects in terms of materials packaging or silicon. We have not had an impact on supply at all."
Over at Nvidia, a spokesperson says that the Japanese disaster has had very little impact on its production of GPUs and chipsets. "All of the factories that produce our products are outside of Japan, mostly in Taiwan, and they have been unaffected," he said. "Some of the substrate material used in the assembly process comes from Japan, and could be subject to delays. If there was an issue, there would be no impact until early Q2, but we believe supply would catch up later in Q2." ®