15 March 2012

One year on: Japan's nand sector recovers from earthquake disaster

A year on from the Japanese earthquake, the country's nand flash memory industry has rebounded in response to strong demand, according to IHS iSuppli.

According to the market analyst, Toshiba, the country's only nand flash manufacturer, has quickly regained some of its lost market share.

The earthquake occurred on 11 March 2011 and impacted Toshiba's Q2 financial results, causing the company to lose more than six percentage points of market share during the period. Corresponding share increases went to competitors, Samsung Electronics, Micron Technology and Hynix Semiconductor. By Q3 2011, Toshiba had regained nearly 3% points of share, describing any remaining effects from the disaster as 'negligible'.

"The overall effect of the Japan disaster on the nand industry was short lived, and several factors combined to lessen the impact of the earthquake on Toshiba and on the market as a whole," said Dee Nguyen, memory analyst at IHS. "One factor was that although Toshiba accounted for 35% of global nand capacity at the time of the disaster, its Yokkaichi facilities were far enough from the epicentre to avoid significant damage. Furthermore, there were enough wafers in the supply chain for Toshiba to sustain its factories while wafer suppliers worked to restore production levels. Finally, throughout 2011, the nand demand engine continued to chug along, propelled by rising sales to storage intensive applications such as tablets, smartphones, and solid state drives."

IHS reports that, on the materials side, wafer suppliers were quickly able to restore production one month later, as well as increase production at other sites to minimise any shortage issues to their major customers. The analyst adds that the disaster actually brought a better supply/demand balance to the nand space in the intermediate term, which helped shore up pricing and propel the industry to 10% quarter over quarter revenue growth in the Q3 2011.

Toshiba operates two nand chip fabrication facilities in Japan, Fab 3 and Fab 4, that are located in Yokkaichi, pictured, 500 miles from the epicentre of the earthquake. Immediately following the earthquake, both fabs went offline for a short time, which produced an immediate effect on nand pricing in the spot market. Spot nand prices then spiked by 10 to 15%. After it became known that the earthquake had limited direct impact on the Yokkaichi fabs, nand average selling prices (ASPs) stabilised. Toshiba reported no casualties, with little to no damage to public infrastructure in the area, the building or its power supply. One week after the earthquake, the Yokkaichi factory was operating normally again. The company also was helped greatly by the fact that the government had prioritised electricity consumption to keep facilities in operation, mitigating the impact of power outages and minimising the cost of idle fabs.

"The bigger problem facing chip manufacturers following the quake came from any short and mid term effects incurred upon the semiconductor supply chain, which made it difficult for companies to procure raw materials for their production lines," said Nguyen. "Two of Toshiba's 300mm wafer suppliers, Shin-Etsu and Sumco, were located in the earthquake affected area, and experienced damage to their equipment and facilities as a result.

"Yet one month later, the wheels were already in motion toward a full recovery. By the second week of April, Sumco announced it had restarted mass production and also had hiked up manufacturing at its other sites. Meanwhile, Shin-Etsu, which was the most significantly affected, announced it was preparing to restart production in mid to late April. Thus, by the end of May, the supply of 300mm wafers was close to pre disaster levels, and the inventories at wafer vendors and chip suppliers were sufficient to sustain the industry through a month of lost production."

In July 2011, Toshiba opened Fab 5 on the same Yokkaichi facility, with advanced earthquake absorbing techniques, as well as power compensation technologies designed to protect against power disruptions.

Chris Shaw

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