Is Taiwan weak link in global chip chain?

In the aftermath of the earthquake, attention is being focused on Taiwan's chip and component makers as the weakest link in the global electronics supply chain. Most makers of finished products said they were ready to restart production. However, at 20 or more fabs(fabrication facilities) belonging to chip makers in Hsinchu, power was only gradually being restored. Industry watchers drew attention to potential safety concerns at the high-tech facilities. "It may be that they can't go into the fabs, because it could be like the surface of Venus in there with the chemicals and gasses that are used, "speculated one analyst, "If you've got one or two pipes loose, you could fry yourself walking in there. We really don't know what's going on in a lot of the fabs right now." "I haven't heard dire stories yet," commented Dan Heyler of Merrill Lynch in Taipei, "but fabs typically are full of gasses, and they're very toxic and also corrosive." Each day of lost production costs Hsinchu's semiconductor manufacturers US$20 million, Heyler said. Assuming power is restored over the weekend as predicted, he continued, It's very likely that most companies would return to normal production, though not necessarily at full capacity, by the end of next week. "It's very good that they have partial power, they can begin inspections, and get the chemicals cleaned up and recalibrate equipment, which takes 24 hours or so." Sources at Winbond Electronics said last night the company had 80 per cent power at one facility in Hsinchu. Assistant vice-president denied rumours that toxic chemicals had been released inside the clean room. The quartz glass lining of at least one furnace was broken, he said, but could be replaced relatively easily. Taiwan Semiconductor Manufacturing Co (TSMC) representatives said they had partial power. Staff at both companies said they expected full power to be restored over the weekend. Makers of simpler components such as capacitors, resistors, power sub-assemblies, and printed circuit boards were less seriously affected by the quake, according to Paul Meyer, an analyst at Credit Lyonnais Securities Asia. "Structural damage has been limited, and there are fewer critical processes," Meyer said, "So if you do have the electricity suddenly cut off… as soon as it comes on again, you can restart production - you can pretty much take up where you left off." "We don't really see normal operations for these guys until early next week. When power comes up, they recalibrate their SMT (Surface Mount Technology) lines, they recalibrate their equipment. That's a pretty quick process for the midstream and downstream companies." With the Xmas high season approaching, short supply of chips and other components was the biggest worry for the computer industry, said Daniel Lee spokesman for Behavior Tech Corporation, which makes CD-ROM drives at a factory in the Chung Li Industrial Park, north of Hsinchu. "Regarding our factory and equipment, nothing was damaged during the earthquake. Problems with the electricity supply may delay some of our production lines for CD-ROM drives, but we think that may not be so serious. The output of our Taiwan factory is less than 20 per cent of our total global sales. Our factory in mainland China occupies more than 70 or 80 percent of our sales." "We buy the CD-ROM decoder chip from local suppliers - maybe production will be delayed," Lee said. The company's chips are made by a subsidiary of Hsinchu-based United Microelectronics Corp. The Chung Li factory would be ready to resume operation on Friday, Lee said, but because of an upcoming public holiday the restart would be delayed until Monday. The upcoming mid-autumn holiday could give some companies a breathing space in which to assess and repair damage. Notebook maker Quanta computer is one of many that have asked employees to work over the weekend to make up lost production. ®