Semiconductors And Japan's Earthquake

I have a couple of prognostications on the effect of the Japanese earthquake on semiconductors. Here is the first. There are several bullet points. I'm going to list those plus the final conclusion.

1. GDP will fall
2. Electronic systems will take a hit
3. There will be no change in IC forecast
4. Supply chain issues will be resolved

5. Supply will be constrained but impact on demand will be slight

"In the final analysis, there is no doubt that supply will be constrained in numerous areas relating to the electronic system and semiconductor industries due to the earthquake and tsunami in Japan. However, on a worldwide basis, demand for electronic systems and semiconductors is expected to be only slightly lessened due to the disaster in Japan. Moreover, any lessening of system or semiconductor demand in 2011 due to the earthquake is forecast to be delayed and pushed into 2012, but not destroyed."

That seems about right. Disruptions will decline through 2011 and then if no further disasters strike (like Tokyo getting a big dose of radioactive fallout) things will be back on track in 2012.

Here is a report that provides some further detail.

The disaster, including the earthquakes, a tsunami and an ongoing crisis they caused at the country's nuclear power plants, has not only damaged semiconductor manufacturing facilities, but also affectedJapan's electrical supply and transportation infrastructure.

Thus, many companies are having trouble getting important supplies and shipping out the products they have manufactured.

And it could be four to six months before semiconductor production fully resumes in Japan, said Dale Ford, a senior vice president with IHS iSuppli, a research firm. And that will have a major impact on worldwide supply since Japan is a major cog in the global semiconductor manufacturing process.

Actually, Ford noted that a few of Japan's production facilities are so badly damaged that they may never come back online again.

"This is the biggest impact on the electronics supply chain in the history of the semiconductor industry," said Ford during a Webinar that iSuppli hosted Friday. "We've had other disasters but this is the most significant supply chain impact that the industry has ever experienced."

iSuppli reported last month that the disaster in Japan is currently putting a pinch on 25% of the worldwide production of silicon wafers used to make computer chips. But the trouble is going further than that, according to Ford.

Silicon wafer production has been affected, along with the production of LCD screens, silicon and chemicals, like hydrogen peroxide, used in the manufacturing of computer chips.

Len Jelinek, a director and chief analyst with iSuppli, said that 75% of the global supply of hydrogen peroxide has been affected by the disaster in Japan. The chemical is used to build semiconductor wafers.

"This is a critical situation in that numerous manufacturing fabs that use this chemical are unable to get adequate supplies, which results in slow downs," said Jelinek. "This is rapidly turning into a very concerning issue."

Ford noted that three Japanese facilities that make silicon have not yet been able to return to operation since the earthquake hit on March 11.

So things may not be as rosy as the first report indicates.

If you need a new computer in the next six months to a year my opinion is that you should buy now.