Global IT economy threatened by slapdash Taiwanese practices

The next major earthquake to strike Taiwan could cost chip makers "tens of billions of US dollars" and halt production for months if safety standards are not improved, according to a report which will be presented to the island's electronics industry Tuesday. The report, compiled by US-based SEMI (Semiconductor Equipment and Materials International), says a haphazard approach to safety was responsible for damage to chip-making equipment during the September 21 earthquake. SEMI inspectors who visited Hsinchu's science park on September 25 were told that delicate machinery costing millions of dollars had been torn free of inadequate mountings and jolted across the floor by the force of the quake. The Hsinchu science park, a vital link in the global electronics supply chain, is the source of many of the key chips used in PCs, mobile phones and other products. The SEMI team inspected five chip fabrication facilities, or fabs, and interviewed executives at two others. The team also spoke to sources, such as maintenance engineers, who had access to more than 20 other fabs in the park. SEMI representatives will present their findings tomorrow at a seminar organised by the government's Industrial Technology Research Institute. Some of the slapdash workmanship uncovered by SEMI might seem more appropriate to a scooter repair shop than a billion-dollar chip foundry. For example, the inspectors found heavy machines anchored to flimsy floor or ceiling tiles, and not to the building's structure. In other cases, steel anchorages were fixed to the floor in accordance with safety guidelines, but machinery was not actually attached to them, allowing it to rock freely back and forth during the quake. The report does not name any of the companies inspected. However, sources in Hsinchu say one part of the document appears to refer to Worldwide Semiconductor Manufacturing Corporation (WSMC). Like one of the unnamed companies in the report, the effects of the quake were magnified at WSMC because the company's plant is built on soft soil above an old lakebed, the sources claim. WSMC spokesman and marketing manager, Justin Wang, said he did not know if the facility was actually on top of a former lakebed, as he had joined the company after construction was completed. He suggested that section of SEMI's report could refer to another firm, and named Taiwan Semiconductor Manufacturing Company (TSMC) as a possible candidate. Mr. Wang dismissed rumours that his company's chip manufacturing foundry had suffered serious structural damage. "We hired a Japanese structural engineer to thoroughly check it out - there was no damage". Business is so good, he said, that WSMC is now operating at "135 percent of full capacity." He also refuted suggestions that poorly anchored machinery was damaged at WSMC, saying the company was prepared for the quake. "Obviously we didn't know the earthquake was coming," he said, "but we happened to have a Japanese facility engineer, who worked at Texas Instruments in Japan, and went through the Kobe earthquake personally." Texas Instrument's joint venture foundry was damaged in the 1995 Kobe quake. Taiwan's second largest chip maker, United Microelectronics Corporation (UMC), was apparently more fortunate than some of its competitors. Following a fire that destroyed one of its fabs several years ago, the company has been particularly safety-conscious, said spokesman Alex Hinawi. An inspection a few months before the quake identified and fixed numerous potential problems, he said. For example, UMC took action to secure quartz furnace tubes, and did not lose as many of these crucial components as other companies, he claimed. Several companies - sources named TSMC among them - suffered significant damage to equipment on upper floors. Multi-story structures are common in the popular, and overcrowded, science park; unfortunately, earthquake effects are amplified in proportion to a building's height. Despite the numerous violations of safety guidelines reported by SEMI, the 110 km which separates Hsinchu from the quake's epicenter helped prevent serious physical damage. The report says that quake-related power outages caused the majority of the losses suffered by chip makers - estimated at close to US$1 billion by SEMI. An executive at one chip maker questioned the objectivity of the SEMI report. The organization's members include manufacturers of chip making equipment, who could benefit if fabs were refitted with quake-proof machinery. A repeat of the magnitude 7.1 quake that struck near Hsinchu in 1935 would devastate the science park, costing chip makers months of production and tens of billions of US dollars, the report concludes. Many existing structures are designed to withstand a quake of force seven or less. "Numerous injuries and possibly deaths" would be likely inside chip foundries, which use large quantities of poisonous chemicals in their day-to-day operations, SEMI warns. The report said chip makers could guard against potential injuries and losses by paying more attention to safety now. Chip makers appear to be paying attention. "they will bolt things down better, and new fabs will probably be designed better," said a Taipei-based semiconductor industry analyst, who spoke on condition of anonymity. "We're probably going to implement earthquake-proof tables for sensitive equipment", said Mr. Wang of WSMC. The company's recently completed fab is more quake-resistant than its existing facility, he added. However, only limited improvements are likely at existing fabs. The industry analyst cautioned, "...it really isn't a concern for a lot of people, they think of the quake as more of a one time event." Most of the next generation of chip plants will be built near Tainan, not Hsinchu. Unfortunately the southern city is no safe haven: it suffered a magnitude 7.0 quake in 1968. ®