The huge earthquake to hit Sichuan province will not, many believe, have a significant impact on the chipset supply chain.Both Intel and Semiconductor Manufacturing International Corporation (SMIC)have operations in Chegndu but no one is expecting these to effect the supply chain. Digitimes says:
Despite concerns the 7.8-magnitude earthquake in Sichuan, China may have a possible impact over ongoing IC supply as Intel and Semiconductor Manufacturing International Corporation (SMIC) both run IC backend facilities in the region, industry players from Taiwan caution against overreacting.
Most industry players from Taiwan believe that impact from the quake should be short-lived. Recalling experience from the 921 earthquake that shook central Taiwan nine years ago, sources at Advanced Semiconductor Engineering (ASE) indicated that company operations were only affected for one day. They added in saying that industry players should not overreact and noted that other packaging and testing houses would not "benefit" from a sudden influx of orders.
Sources at SMIC's Chengdu Cension Semiconductor Manufacturing fab said the fab activated anti-quake measures and production resumed during the evening of May 12. Monthly capacity of 7,000 8-inch wafers was not affected, they added. This Chengdu fab mainly focuses on power management IC (PWM IC), high-voltage IC and niche memory production.
The Chinese-language Economic Daily News (EDN) quoted SEMI senior director of industry research and statistics Dan Tracy as saying that Intel is flexible enough to adjust its capacity mix, meaning the quake impact should be limited. Tracy also commented that impact should be limited for other semiconductor companies such as SMIC.
Some sources from the packaging and testing industry were also quoted by another EDN report as saying that the majority of backend production at the Intel fab in Chengdu is dies instead of wafers, meaning that any damaged chips could be replaced relatively quickly. They also added in saying that Intel outsources up to one-tenth of its IC backend production orders to other partners.
Currently ASE is partnered with Intel for the packaging and testing of southbridge chips and some NAND flash memory, while Siliconware Precision Industries (SPIL) is also partnered for southbridge and some networking chips, according to industry players.
However, since some of the production capacity has been affected, Intel are considering moving some of their production to other plants. According to China Economic News (CENS):
Intel Corp. is reportedly mulling delegating part of its production at its test and assembly factory in the earthquake-stricken Sichuan Province of mainland China to its other factories and pure assemblers including Advanced Semiconductor Engineering (ASE) and Amkor.
CENS also speculates that Intel will have to outsource some of its testing to other companies. CENS says:
Taiwanese industry watchers estimated Intel might contract ASE and Siliconware to test and assemble south-bridge chips for the chipsets and some logic chips waiting at the Chengdu factory. ASE is running a factory outfitted with 1,500 wire-bonding machines in the mainland. The factory will double output capacity by the end of this year.
Although the the factories may not have been damaged, the damage on the overall infrastructure in Chengdu may have an effect. Shortly after the September 21 earthquake in Taiwan in 1999 (921)there were rolling power cuts for a month. The same may happen in Chengdu. CENS reports water and electricity have already been cut. I should also imagine many of the transportation routes have also been cut off and the remaining routes saturated with humanitarian aid. It will take some time for the infrastructure to be ready for full production capacity and for the supply chain to run smoothly.
Of course the priority now for the authorities there must be to deal with the human tragedy.
Article 1: Taiwan packaging and testing companies caution against quake-impact overreaction
Article 2: Intel May Switch Production From Quake-stricken Sichuan Plant to Shanghai
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