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MacqTech Express
Regional Supply chain - Quake impact
Event
Our Japan tech team assesses the implications from the devastating quake in
Japan. The three key areas to focus on are 1) physical production damage
(Shin-Etsu, Tokyo Electron, Renesas), 2) supply chain/logistical disruptions
(semi-wafer, connectors, passives), and 3) psychological impact (memory spot
price, battery, TFT-LCD). Near-term disruption is likely in semi-wafers, memory,
and connectors, leading to spot price strength in areas like DRAM/battery, but
downside for PC cost structure and smart phone supply chain. While the focus
is on plant damage and supply chain logistics, we caution that a bigger negative
impact to regional tech would arise from a prolonged power rationing as a result
of the nuclear power plant issues in Japan.
Impact
Semi wafer - disruption. Damian Thong’s checks indicate Shin-Etsu’s
Shirakawa fab (300mm) saw no major damage, but restoring production may be
complicated by the need for inspection/repairs, logistical disruption, unstable
power, and close proximity to Fukushima nuclear plant (60-70km away). Shin-
Etsu has ~30% unit market share in 300mm wafers and accounted for >1m
units/mo of supply vs demand of 3.6m units/mo in 4Q CY10, of which ~75% is
used in memory. Shin-Etsu is the #1 supplier to Elpida and #2 supplier to
Toshiba, thus if output is disrupted for an extended period, we expect there to
be wafer shortages throughout the chip industry, which may be compounded if
there is disruption to MEMC's 300mm wafer production plant in Utsunomiya as
well. SUMCO, the second supplier (0.4m units/month of excess capacity), could
benefit, but wafer shortages could overall curb memory chip production and
cause a spike in pricing, leading to pressure on the PC and smartphone supply
chains.
Connectors-impacted. George Chang’s check show limited physical damage
to Hirose’s plants, but potential supply chain impact due to issues at smaller
part suppliers. Hirose has ~21% global share in connectors (Molex is its biggest
competitor), thus potential impact could be felt in handset/smartphone space.
Passives - some impact. Japan is ~70% of passives global share. There is no
physical damage to the plants of vendors like Murata, TDK and Taiyo Yuden,
but short term impact in production and supply chain is likely and may lead to
some spillover to other vendors such as Semco (high end MLCC) and
potentially Yageo at the mid-to-low end. Nippon Chemi-Con's major plants are
located in the northeast so there could be production disruption to its aluminium
capacitor which could impact motherboard, TV, and power supply chain.
Displays - neutral impact. Our LCD checks indicate minor damage to AGC’s
tanks for small/medium panels, but GLW’s furnaces are operational. IPS’s 6G
fab could see some shutdown, but Sharp is intact. We see limited impact in
LEDs. Overall, we believe any shutdown or prolonged supply chain disruption
from power outages would help panel makers firm up pricing negotiations
Outlook
We expect near-term disruption from the quake damage as well as supply chain
issues. While the near-term headlines and focus is on the production damage
and supply chain disruption from the quake, we believe an overlooked but
potentially more lasting impact could come from any extended power shortage
or rationing, as this would lead to severe dislocation of the supply chain and a
likely downwards revision in the end demand outlook.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MacqTech Express
Regional Supply chain - Quake impact
Event
Our Japan tech team assesses the implications from the devastating quake in
Japan. The three key areas to focus on are 1) physical production damage
(Shin-Etsu, Tokyo Electron, Renesas), 2) supply chain/logistical disruptions
(semi-wafer, connectors, passives), and 3) psychological impact (memory spot
price, battery, TFT-LCD). Near-term disruption is likely in semi-wafers, memory,
and connectors, leading to spot price strength in areas like DRAM/battery, but
downside for PC cost structure and smart phone supply chain. While the focus
is on plant damage and supply chain logistics, we caution that a bigger negative
impact to regional tech would arise from a prolonged power rationing as a result
of the nuclear power plant issues in Japan.
Impact
Semi wafer - disruption. Damian Thong’s checks indicate Shin-Etsu’s
Shirakawa fab (300mm) saw no major damage, but restoring production may be
complicated by the need for inspection/repairs, logistical disruption, unstable
power, and close proximity to Fukushima nuclear plant (60-70km away). Shin-
Etsu has ~30% unit market share in 300mm wafers and accounted for >1m
units/mo of supply vs demand of 3.6m units/mo in 4Q CY10, of which ~75% is
used in memory. Shin-Etsu is the #1 supplier to Elpida and #2 supplier to
Toshiba, thus if output is disrupted for an extended period, we expect there to
be wafer shortages throughout the chip industry, which may be compounded if
there is disruption to MEMC's 300mm wafer production plant in Utsunomiya as
well. SUMCO, the second supplier (0.4m units/month of excess capacity), could
benefit, but wafer shortages could overall curb memory chip production and
cause a spike in pricing, leading to pressure on the PC and smartphone supply
chains.
Connectors-impacted. George Chang’s check show limited physical damage
to Hirose’s plants, but potential supply chain impact due to issues at smaller
part suppliers. Hirose has ~21% global share in connectors (Molex is its biggest
competitor), thus potential impact could be felt in handset/smartphone space.
Passives - some impact. Japan is ~70% of passives global share. There is no
physical damage to the plants of vendors like Murata, TDK and Taiyo Yuden,
but short term impact in production and supply chain is likely and may lead to
some spillover to other vendors such as Semco (high end MLCC) and
potentially Yageo at the mid-to-low end. Nippon Chemi-Con's major plants are
located in the northeast so there could be production disruption to its aluminium
capacitor which could impact motherboard, TV, and power supply chain.
Displays - neutral impact. Our LCD checks indicate minor damage to AGC’s
tanks for small/medium panels, but GLW’s furnaces are operational. IPS’s 6G
fab could see some shutdown, but Sharp is intact. We see limited impact in
LEDs. Overall, we believe any shutdown or prolonged supply chain disruption
from power outages would help panel makers firm up pricing negotiations
Outlook
We expect near-term disruption from the quake damage as well as supply chain
issues. While the near-term headlines and focus is on the production damage
and supply chain disruption from the quake, we believe an overlooked but
potentially more lasting impact could come from any extended power shortage
or rationing, as this would lead to severe dislocation of the supply chain and a
likely downwards revision in the end demand outlook.
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