Freescale Sendai fab is latest quake victim
4/6/2011 12:01 AM EDT
NEW YORK – Freescale Semiconductor Inc. announced Wednesday (April 6) that it has decided not to re-open a 6-inch fab in Sendai, Japan, which was seriously damaged in the great earthquake on March 11.
Calling its Sendai facility the “semiconductor fab located closest to the epicenter,” Rich Beyer, Freescale’s chairman and CEO, said that the company has “come to a conclusion that it is not feasible to re-open.”
Noting that “we couldn’t even get inside the fab until 10 days ago,” Beyer said that “we discovered a lot of equipment and machinery was severely damaged and moved, ducts and pipes were broken, and gasses and chemicals were leaked.”
While Freescale had already announced plans in 2009 to close the Sendai fab late this year, the recent earthquake appears to have left the U.S. company no choice but to accelerate its closing. The decision will have serious impact on people working for Freescale in Sendai and Freescale’s customers in the global automotive, networking and industrial markets. The Sendai fab, before the earthquake, was in full production, as Freescale was trying to build inventory before the planned shutdown.
Clearly, coping with a massive earthquake and losing their jobs at the same time literally doubles the hardship for Freescale employees. Beyer made it clear that Freescale will extend to all of its 600 employees and 175 contractors working at the Sendai fab compensation, in addition to the severance package the company had previously negotiated in lieu of the planned closing. “We understand that this is a very painful time for all of them. We hope to help them reconstruct their lives,” said Beyer.
Potentially even more problematic for Freescale is to devise an effective plan to take care of customers affected by the lack of qualified parts and components coming out of Freescale’s Sendai fab.
Freescale produced at its Sendai fab 8-bit microcontrollers, analog parts and sensors (i.e. pressure sensors), according to Beyer. Customers for such parts and components are “pretty much across the board” (not only those based in Japan, but North America and Europe) in the automotive market, and some networking and industrial segments, said Beyer. “Very few parts were produced for the consumer market.”
Since immediately after the shutdown of the Sendai fab, Beyer stressed that Freescale has undertaken various actions in the effort to find alternative components for customers.
First, “We had been already building inventories – more than usual – to extend the period of time” for our customers to use specific components, said Beyer.
Second, “We have been going through part by part to find viable alternatives” to those produced and qualified at Sendai, he said. “And there are some of those.”
Third, “We have been already immediately ramping up the production of alternative parts” at Freecale’s 8-inch wafer fabs including the Chandler and Oak Hill fabs, in addition to TSMC’s lines.
Fourth, Freescale is rapidly accelerating the qualification processes for additional parts.
Automotive customers, in particular, are known to be sticklers to the rule, using only parts they have qualified, sourced from their chosen qualified suppliers. Asked if Freescale has thus far lost any of customers because of the Sendai fab shutdown, Beyer made it very clear: “We are not seeing that.”
He added: “They continue to work with Freescale, because we do understand their requirements. If we have to make parts in our Chandler fab, for example, those parts need to be re-qualified, but it’s not like we need to redesign them.”
Asked how long it takes their customers to qualify parts, Beyer said this is usually a 30 days to 60 day process.
Asked if the proximity of Freescale’s Sendai fab to the Fukushima Nuclear Power Plants was a factor in the decision, Beyer said the radiation level in the area has been safe and is not a problem. “Hopefully, it will never become a problem,” he added.
The Sendai fab is 70 miles away from the Fukushima nuke plant.
A spokesperson for Freescale said the company does have earthquake insurance on the Sendai fab. The spokesperson said he did not have specific information about the amount Freescale might receive as a result and said it would be premature to speculate on those details.