Continuing shortage

On January 3, 2022, a 6.0-magnitude earthquake occurred off the east coast of Taiwan. However, since most of the local DRAM units and foundry moulds are located in the northern and central parts of the island, investigations have shown that there was no noticeable damage to equipment from the fab.

There were already concerns brewing in the broader memory market about the supply-side impact of the COVID-19 shutdown in the Chinese city of Xi’an. Fortunately, the earthquake did not add to these existing concerns.

On January 22, a series of large earthquakes off the coast of Kyushu, Japan forced Toshiba Electronics and Storage Corporation to suspend operations at its semiconductor plant in Oita, southern Japan.

However, Toshiba was not the only electronics company affected by the earthquakes. Renesas soon confirmed that some equipment had halted operations.

While Toshiba confirmed damage to some production lines in its Oita operations – focused on semiconductor production – Renesas, its operations in the region, are running without any damage.

On January 26, Toshiba resumed production on the 150mm wafer line in its Oita operations – but it would take until February 14 before the company could begin introducing the wafer on the 200mm line and until February 28, before the full earthquake. Production levels have been restored at Oita Company’s operations.

Russia’s invasion of Ukraine

Ukraine is a major supplier of semiconductor raw material gases including neon, argon, krypton and xenon. According to TrendForce, the country provides nearly 70% of the world’s neon gas capacity. Although the proportion of neon gas used in semiconductor processes is not as high as in other industries, it is still a necessary resource. Several companies, including Micron, ASML and TSMC, have been quick to diversify their sources of noble gases.

Micron says its supply of neon is mainly sourced from various suppliers across the European Union, the United States and Asia. An ASML spokesperson told Reuters that the company sources less than 20% of the gas from the region. Regardless, ASML will start looking for alternative sources for the amount of neon it uses. During the company’s earnings call, CC Wei, CEO of TSMC, stated that the company’s strategy is to continuously develop multi-sourcing sourcing solutions to build a well-diversified global supplier base.

“For specialty chemicals and gases, including neon and alion, we source from multiple suppliers in different regions, and have set up a certain level of stock available.”

What started as a conflict has evolved into an ongoing war, affecting both individuals and businesses. International economic sanctions have been imposed on Russia and many companies have suspended their domestic operations in the country and all shipments to Russia have been halted.

“The Russian invasion of Ukraine is a negative supply shock to already strained supply chains. It will take several months to determine the full impact it has on the electronics industry,” IBC chief economist Sean Dubravac said in a news release in May.

With the ongoing war, air freight has become a concern for many. The airspace over Russia and Ukraine has been closed – adding extra hours to any air cargo, which requires more fuel per plane and therefore cannot accommodate the same transport capacity.

In early March, EMS provider Asteelflash provided an update of the rail/road trade route from Asia to Europe, stating that the Silk Roads were at a standstill.

The company further stated that large rail consumers are shifting to sea freight – adding additional pressure to marine logistics operations.

Lockdown hits Shenzhen as virus infections surge

As we entered March, a new – or old – issue emerged. In response to an increase in Covid-19 cases in the Chinese city of Shenzhen, the government – while maintaining its strict no-Covid policy – has decided to close the city’s southern business hub. At the same time, access to Shanghai has been restricted by suspending bus services.

Citywide DNA tests were launched as Shenzhen was tired to limit developments. A notice issued by the Shenzhen COVID-19 Prevention and Control Command Office said business employees – except for those dealing with supplies of essentials such as water, electricity, fuel, gas, telecommunications, food and public sanitation – will be required to work from home or suspend production and operating activities. Initially, these measures were said to remain in place until March 20.

But it didn’t take long for the next major lockdown to happen in China. On March 28, Shanghai went into lockdown – this time, local authorities wanted to maintain international transport, but the city would be closed for at least ten days.

With Shenzhen reopening, warnings were issued that the city’s three major container ports and air freight routes from Shenzhen – and Hong Kong – would be severely congested.

Data from VesselsValue in late March showed a nearly fivefold increase in the number of ships waiting to load or unload in Shanghai when compared to two and a half weeks. S&P Global (IHS Markit) painted a similar picture in late April, noting that overall congestion levels at the port of Shanghai have increased by about 30-40% since the beginning of March 2022. As of today, port congestion may continue for a while.

New earthquakes hit Japan and Taiwan

A 7.3-magnitude earthquake occurred off the coast of Fukushima, Japan, on the evening of March 16. Most of northeastern Japan is a production center for global semiconductor raw materials.

Renesas operates three factories near the epicenter, namely the Naka factory in Hitachinaka, Ibaraki Prefecture, the Takasaki factory in Takasaki, Gunma Prefecture, and the Yonezawa factory in Yonezawa, Yamagata Prefecture. Renesas said in an update that production at the Naka plant was immediately halted.

Morata provided an update that some buildings and equipment belonging to its operations were damaged as it announced restoration work. Operations affected were Tom Murata Manufacturing in Tomei, Miyagi Prefecture. Manufacture of Sendai Murata in Sendai, Miyagi, Miyagi Prefecture; As well as the Koriyama Factory and the Motomiya Factory of Tohoku Murata Manufacturing located in Fukushima Prefecture.

Two days later, on March 18, Murata resumed operations at both the Koriyama plant and the Motomiya plant. Tome Murata Manufacturing in Tome, Miyagi, expects to resume some production on March 21. Sendai’s operations were back in operation on March 22nd.

Renesas Yonezawa plant resumed production for all operations on March 18. The company returned to full production capacity before the March 23 earthquake at the Takasaki plant. The Renesas Naka plant reached full production capacity before the earthquake on March 23.

On March 23, when companies in Japan reached full production levels before the earthquake, a 6.6-magnitude earthquake struck southeast Taiwan. The earthquake was soon followed by another 6.1-magnitude earthquake, the Central Meteorological Bureau (CWB) reported.

Evertiq has reached out to several semiconductor manufacturers with operations in Taiwan to update the status.

In a statement emailed to Evertiq, TSMC said there was no significant impact on production and no damage to equipment or facilities.

UMC, the semiconductor manufacturer, told Evertiq that the earthquake had no material impact on the company’s operations, that all employees are safe, and that manufacturing remains normal.

Micron said in a statement to Evertiq that all of its team members have been counted and reported for their safety and that the company is assessing the potential impact and will inform customers as appropriate.

logistical headache

It entered April, and due to another explosion in rising COVID-19 cases, Shanghai has maintained its rolling lockdown policy since March, and Kunshan – a major production center for the electronics industry near Shanghai – is now also feeling the effects.

TrendForce reports that limited manpower, logistics, and pending transportation options mean neighboring OEMs and ODMs can only rely on on-site inventory to meet the needs of barely-there production lines, exacerbating component mismatches.

Analysts at TrendForce also pointed to the problem that MCLL suppliers in China, including those in Tianjin, Suzhou, Wuxi and Guangdong, have not yet been shut down. However, inter-provincial logistics and transportation have clearly felt the escalation of inspections and supervision since the end of March, extending timetables. However, the biggest problem for MLCC suppliers at this point is that they cannot deliver the materials to Shanghai and Kunshan.

If you are interested in the developments of the current state of semiconductors, you should come to Evertiq Expo Berlin where Dennis Dahlgren will provide a timeline of events – from the beginning of the state of shortage, all the way to where we are today.

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