After the disaster: rebuilding Japan and the electronics industry supply chain.
The World Bank estimates the cost of damages could reach $235 billion and warns that economies across East Asia may be affected. Our friends in Japan are resilient; they will rebuild. But we live in a global economy and a global electronics industry. The impact to the electronics industry infrastructure will result in short-term shortages and potential long-term changes to the way business is conducted.
The supply chain in electronics is more than the name stamped on the component mounted on the board of your latest electronic gadget. It requires understanding the complete electronics manufacturing process and its logistics, from the company that pulls crystal to make silicon ingots to those that slice and polish wafers, fabricate devices on the silicon wafers (and their material and equipment suppliers) and the firms that assemble these little pieces of silicon into packages, which in turn are mounted on a board and assembled Into an end-product. The shortage of a single component can impede shipment of a finished product.
While production has resumed at many plants, rolling blackouts and power outages in the region are disrupting production even at undamaged facilities. The loss of the Fukushima nuclear power plant slashed energy production by 30% and will pose a challenge, especially during summer months, and that's notwithstanding potential future radiation issues. Logistics, including the transportation of raw materials and finished products, as well as employees, are improving but remain a challenge.
Acute problem areas abound. Goldman Sachs estimates that Shin-Etsu'S plant in Fukushima Prefecture accounted for 20% of the world's 300mm silicon wafer production. (1) (The company plans to move wafer production to other sites.) MEMC has suspended operations at its 300mm wafer slicing and polishing facility in Utsunomiya, 130 miles south of Sendai. (2) Concerns have been expressed about photoresists used in semiconductor production and chemical slurries used in wafer fabrication.
Supplies of bismaleimide triazine (BT) resin, for IC packages that use a laminate substrate, remain a concern. Mitsubishi Gas Chemical, the major supplier of BT resin, has plants in the region where the disaster took place. MGC subsidiary Electrotechno (Nishishirakawa-gun, Fukushima) and its Kashima plant (Kamisu City, Ibaraki) were closed due to partial damage to equipment and buildings. Production is scheduled to resume, but at much lower levels. BT resin is used to make the laminate substrate for some CSPs, wire-bond PBGAs, and the core of flip-chip substrates with buildup layers. For years, much of the industry has relied on a single resin source. Some companies qualified Hitachi's E689, but the plant that produces this resin is in the same area. (It is scheduled to resume operations.) Alternatives include Doosan, Nan Ya Plastics and Endicott Interconnect (which makes its DriClad resin and manufactures substrates from the material). Some companies are considering high Tg FR-5 materials as a replacement. Qualifying a new substrate supplier takes at least two months, and qualifying a resin even longer.
Other board and substrate fabrication materials have also been impacted, including copper foil and glass fiber cloth. Packaging and assembly materials such as solder masks and solder balls have been mentioned as short-term problem areas.
'Just in time' just departed. While Japan suffers, companies with facilities in China, Korea, Taiwan and elsewhere in Asia could benefit. According to Taiwan's Industrial Economics and Knowledge Center (IEK), Taiwan's chipmakers import 600,000 1.2" (300mm) silicon wafers monthly, 70% from Japan. IEK suggests that if Japanese wafer suppliers don't recover soon, Taiwanese wafer producers such as Formosa Sumco Technology (FST) might pick up business. In fact, some local dynamic RAM makers, such as Nanya Technology and Inotera Memories (both subsidiaries of Formosa Plastics Group), have increased reliance on FST to minimize risk. Japan's disaster also caused production outages at JX Nippon, which previously supplied 75% of the global market for rolled annealed copper foil used in flexible circuits. For printed circuit board makers, switching to clectrodeposited copper foil is an option. Taiwanese manufacturers of electrodeposited copper foil, such as Nan Ya Plastics and Chang Chun Plastics, might benefit. (3)
The automotive industry, once scoring big points for "just in time" manufacturing, has already felt the impact. While keeping large inventories of components on hand is not necessarily the best financial strategy, the new thinking may inform a more balanced approach. And while some industry analysts were concerned about higher inventories, the events in Japan have mitigated this potential problem.
Natural (and sometimes manmade) disasters are a part of our existence. It is our response to these disasters that test mankind's ingenuity and ability to rebuild and innovate. New suppliers of key materials in the electronics industry will likely emerge. Research activities to develop alternatives in many Asian countries will see a boost in spending. Japanese companies have established many production plants outside of Japan, and this trend is expected to continue. While Japan's GDP will suffer this year, rebuilding will result in future growth. It's a painful lesson, but we will come away wTith a better understanding of the supply chain and the need to maintain better relations with vendors, and renewed investments in alternate forms of energy, including solar and wind.
(1.) Donald Lu, et al. "Japan Earthquake to Create Both Demand and Supply Challenges," Goldman Sachs Equity Research, March 14, 2011.
(2.) "The Impact of Japan's Earthquake on the Electronics and Semiconductor Industries," Gerson Lehman Group, March 15, 2011.
(3.) Y. Chiu, "How Japan's Earthquake is Shaking Up Taiwan's High-Tech Sector," IEEE Spectrum, March 2011,
E. JAN VARDAMAN is president of Techsearch International (techsearchinc.com); firstname.lastname@example.org. Her column appears bimonthaly.
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|Title Annotation:||ON THE FOREFRONT|
|Author:||Vardaman, E. Jan|
|Publication:||Printed Circuit Design & Fab|
|Date:||May 1, 2011|
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