TAIPEI, Taiwan The ripple effect of Taiwan's deadly earthquake is beginning to surface throughout Asia and beyond, affecting everything from DRAM prices to the supply of computer peripherals.
Some regional analysts predicted that shortfalls will start slowing OEMs beginning in November, since "running wafers" ruined by the Sept. 21 quake would have shipped in the next several weeks. They warned that supply shortages could extend into next year.
The immediate impact of the quake on the global semiconductor industry was to push DRAM prices sharply higher this week on the spot market. In South Korea, unit prices for 64-Mbit DRAM modules topped $21 by midweek. Demand was highest for 8-M x 8-type PC100 DRAM modules on the North American spot market, where prices soared to $21.25.
Asian analysts said that's about five times the price of memory modules in early July. Prices on the spot market were hovering around $15.50 on Sept. 20, the day before the 7.6-magnitude temblor struck central and northern Taiwan.
Higher contract prices
Micron Technology Inc. (Boise, Idaho) last week also raised OEM contract pricing for 64-Mbit DRAM chips from $7.50 to more than $9 and warned of additional price hikes to come. The increase is a result of several factors, including "just incredible demand from PC OEMs," said Kipp Bedard, Micron's vice president of investor relations. "It looks like there's probably another move upcoming fairly shortly," he added during a presentation at an investment conference in San Francisco this week.
Spot-market price hikes are showing no signs of slackening, with reports indicating $19 to $20.50 as the range for 64-Mbit components, Bedard said. "There's not a lot of volume going on there because the suppliers [were] woefully short, even prior to the earthquake in Taiwan, just meeting the OEM requirements for the fourth quarter."
Bedard's comments squared with analysts' assessments in Asia. They said worried OEMs are driving demand out of concern that production slowdowns in Taiwan will make it harder to find DRAMs as they gear up for the holiday season.
As a result, systems manufacturers in South Korea and elsewhere are focusing their concerns on how long the supply crunch will last. Industry observers in Seoul said the shortfall will begin to bite in November and could extend well into the first half of 2000.
Across the Taiwan Straits in mainland China, industry watchers were equally pessimistic, resigned to the likely decision by Taiwanese manufacturers to supply the larger North American market before meeting the needs of Asian OEMs. Since U.S. firms are their biggest customers, Taiwan's IC and system companies will seek to primarily satisfy the requirements of American clients at the expense of Asian customers, industry sources in Beijing said this week. Hence, Asian consumer electronics manufacturer and others who rely heavily on Taiwanese fabs are expected to suffer from extended delays in chip shipments.
Chinese companies declined to disclose their strategies for coping with the delays, fearing their customers will lose confidence in the ability to deliver products.
There appears to be little wafer capacity coming online to take up the slack and reduce pressure on DRAM prices, industry observers said. While Samsung plans to open a new fab next spring and Micron will add another 5,000 wafers per week at it overseas fabs, a new operation Shanghai Huahong NEC Electronics Co. Ltd. is the only new capacity in the pipeline this year. The joint venture has so far declined to say whether it might seek to fill the supply gap caused by the Taiwan quake.
Elsewhere, Taiwan Semiconductor Manufacturing Co. Ltd. is expected to begin setting up a facility in Singapore in early 2000. Observers there said the chip maker may be considering accelerating the move.
Also expected to suffer as a result of quake-related supply problems is Taiwan's dominant computer peripheral industry, which includes manufacturers of chip sets, monitors and mainboards for PCs. As the biggest customer for DRAMs, the PC market is sure to be hurt by dwindling supplies of peripherals in the weeks ahead.
Still, industry analysts said Taiwanese peripheral makers will be able to recover from the earthquake much faster than chip makers.
Reliable electrical power to fabs in Taiwan's Hsinchu Science Based Industrial Park remains the biggest question mark. Taipower, the island's state-run utility, announced a power rationing plan this week in the midst of a heat wave.
The plan calls for increasing the rationing of electricity to a total of seven hours per day for most businesses and residents. Taiwan's fabs have been given "100 percent, all-the-time" status under the rationing plan, as have hospitals and military installations.
Taipower officials said that the one-two punch of the earthquake and increased air-conditioning use had knocked out 41 percent of the available electrical capacity for Taiwan.
Most of Taiwan's Hsinchu fabs including TSMC, United Microelectronics Corp., Winbond Electronics Corp. and Mosel Vitelic Inc. were reporting significant progress in moving back toward a production mode this week.
This story was written by George Leopold based on reporting by Mark Carroll, Sunray Liu, Robert Ristelhueber and Yoonhee Park