Japan quake could hit semiconductor production, prices

Because Japan produces more than 40% of the world's NAND flash memory chips -- and 15% of its DRAM -- the 8.9-magnitude earthquake that hit today could seriously affect worldwide semiconductor supplies, according to research firms.

According to Jim Handy, an analyst with semiconductor research firm Objective Analysis, it would not take a large drop in wafer production to cause prices to increase dramatically. Even a two-week shutdown of fabrication plants would remove from production a sizable share of wafer production. As a result, the research firm is predicting major price swings and near-term shortages.

Earthquakes of lesser magnitudes, such as a 5.9-magnitude one in 2008 and two quakes measuring 6.0 and 6.8 in 2007, raised similar concerns about the semiconductor industry, according to Objective Analysis.

Not everyone agrees with the Objective Analysis view, however. Market research firm iSuppli does not believe that DRAM and NAND production will be affected by the quake.

ISuppli analyst Mike Howard said his contacts in Japan have indicated that production at facilities owned by Micron, Toshiba and Elpida Memory are far enough away from the quake's epicenter to avoid damage. "They are all in the southern and western portion of Japan -- well away from the epicenter. I wouldn't anticipate any production reduction," he said.

But Objective Analysis argued that semiconductor demand will likely be affected, whether fabrication facilities are closed or not, because many electronics manufacturers are in Japan, and their consumption of semiconductors stop until earthquake damage is repaired.

Today's earthquake already forced Sony to shut down production in six of its northeastern factories; Nikon, which has facilities close to the quake's epicenter, may also have been affected, according to early reports.

By comparison, a 7.6-magnitude earthquake that hit Taiwan in 1999 caused significant damage in Taipei and stopped fabrication production in facilities in Hsin Chu, according to Objective Analysis. In the U.S., the 1989 Loma Prieta earthquake, which measured 6.9 on the Richter scale, stopped fabrication production in Silicon Valley.

That earthquake had only one hundredth of the power of today's earthquake.

"Objective Analysis is contacting as many of these companies as we can to check on their status, but the earthquake is so large that it might be several days before its impact can be fully comprehended," the company stated in a statement.

Lucas Mearian covers storage, disaster recovery and business continuity, financial services infrastructure and health care IT for Computerworld. Follow Lucas on Twitter at @lucasmearian or subscribe to Lucas's RSS feed . His e-mail address is lmearian@computerworld.com .

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