Japan Disaster Rocks Computer Chip Supplies

The disaster in Japan is putting a pinch on 25% of the worldwide production of silicon wafers used to make computer chips, according to a report released Monday.

Two Japanese factories -- Shin-Etsu Chemical Co. Ltd.'s Shirakawa facility and MEMC Electronic Materials Inc.'s Utsunomiya plant -- have halted operations. Those two facilities alone make up a quarter of the global supply of silicon wafers used to make semiconductors, according to IHS iSuppli, a research company. Both companies supply wafers to semiconductor companies around the globe.

"Because of this, the suspension of operations at these plants could have wide-ranging implications beyond the Japanese electronics industry," iSuppli noted in its report. "A 25% reduction in supply could have a major effect on worldwide semiconductor production."

Researchers also noted that Shin-Etsu's Shirakawa plant is responsible for 20% of the worldwide silicon semiconductor wafer supply. There reportedly has been significant damage to the plant's production facilities and equipment. According to iSuppli, Shin-Etsu is trying to shift production to other facilities, but it's not clear how long that will take.

Japan was rocked by a 9.0 magnitude earthquake, and a subsequent tsunami, on March 11. After the initial disaster, the country then had to deal with a crisis with its damaged nuclear power plants, that, among other things, has caused rolling brownouts and blackouts.

Many roads are still impassible in Japan, and the country's transportation system has been staggered. If factories are operating, it's difficult to deliver supplies to them and to get finished product out to customers.

"What we're seeing now are production stoppages for various reasons," said Dan Olds, an analyst with The Gabriel Consulting Group. "Some of the plants are in areas unaffected by the quakes but have stopped production due to the magnitude of the overall crisis and associated people and logistic problems."

One of the big questions is how long the shortage will go on. "What we really don't know is how long a process this will be. I tend to think that we're talking in terms of weeks or maybe a few months," Olds said. "At this point, I don't think we can dub this an all-out crisis."

Olds noted that one obstacle reason that may keep factories from operating is because of the country's nuclear power plant crisis.

"Japan relied on nuclear power for about 30% of their overall capacity, with that out of the mix, gas and coal-fired generating will have to pick up the slack," he said. "We don't know if they have enough existing capacity to handle their industrial and consumer electric needs."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin or subscribe to Sharon's RSS feed . Her e-mail address is sgaudin@computerworld.com .

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