|Update: Analysts fear shortage of key resin|
3/17/2011 2:47 PM EDT
SAN FRANCISCO—One of the biggest potential problems for the semiconductor industry resulting from supply disruptions in the wake of last week's massive earthquake in Japan could be shortages of bismaleimide triazine resin, an epoxy resin used in chip making, analysts warned.
Craig Berger, an analyst with FBR Capital Markets, said contacts in Asia warn of the possibility of a shortage of BT, an epoxy resin that is used in many chip package substrates including plastic ball grid array packages produced by back-end assembly and test firms. The resin is almost entirely produced by Mitsubishi Gas Chemical Inc. (MGC), according to Berger.
MGC said Monday that two of its facilities, one in Fukushima prefecture and one in Ibaraki prefecture, shut down due to partial damage to equipment and buildings. The rolling blackouts currently in force in the region may affect future MGC operations, including operating at sites that were not damaged in the quake, the company said.
According to Japanese equity research firm Nomura Securities Co. Ltd., the two MGC facilities account for nearly all of the BT produced in the world. "This is an unfortunate coincidence where 90-100 percent of the world's supply of bismaleimide triazine is made in northeastern Japan," said Shigeki Matsumoto, an analyst with Nomura, in a report Wednesday (March 16).
According to Nomura, not all of the world's integrated circuits use BT, but the resin is used extensively in mobile phone chipsets.
Berger said a shortage of BT would most impact programmable logic vendors Xilinx Inc. and Altera Corp., as well as Qualcomm Inc.
On Wednesday, Qualcomm said it does not foresee any significant impact to its ability to supply chips to customers following the earthquake. Qualcomm said it would use its buffer stock of BT and make short-term adjustments to its materials mix to mitigate potential shortages of BT. Qualcomm uses either BT-based or epoxy-based laminate materials in its chip set packages, the company said.
"There are a number of non-Japanese suppliers poised to take up the slack with alternatives to BT, but whether they can be qualified in time remains uncertain," said Nomura's Matsumoto.
Jan Vardaman, founder and president of TechSearch International Inc., said Hitachi Chemical Co. Ltd. makes an alternative resin—MCL-E-679—that has been qualified by a few suppliers, but she said she has not been able to verify whether the production of that material was impacted by the quake. Several Hitachi manufacturing sites were damaged in the quake and remain idle.
"The bottom lines is that the industry has not qualified a replacement material that's supply is sufficient to alleviate in the short term the problem," Vardaman said. Even aside from the physical damage suffered by plants, it is not known when regular power will be restored in the area, she added.
Potential alternatives to BT are made by Park Electromechanical Corp., which operates under the name Nelco, Rogers Corp.'s Advanced Circuit Materials division, Isola Group, Endicott Interconnect Technologies Inc. and possibly others, Vardaman said, adding that her firm was still researching the issue. But none of these materials have been qualified for this application by suppliers, she said. Qualifying the materials for use would take at least six weeks, she said.
"The industry just hasn't had the motivation to qualify a lot of other materials," Vardaman said.
Vardaman said she is aware that suppliers have some inventory of BT on hand, but said that she does not personally believe it would be sufficient to overcome a potential shortage.
Matsumoto noted that MediaTek Inc. does not use BT in its packages, but that Spreadtrum Communications Co. Ltd. does. Matsumoto said Texas Instruments Inc. uses BT in its packages, but that since TI's Miho fab was damaged in the quake and won't return to full production until at least July, the BT issue should be resolved before it becomes a problem for TI.
According to Berger, the back-end assembly and test firms that use BT include Advanced Semiconductor Engineering Inc., Siliconware Precision Industries Co.Ltd. and Amkor Technology Inc.
Nomura said the two main users of BT that the company is aware of are Taiwanese IC package substrate providers Kinsus Interconnect Technology Corp. and Unimicron Corp. Nomura also warned that if Qualcomm can't overcome the BT issue it could affect its ability to supply parts to high-profile handsets made by Apple Inc., HTC Corp. And Samsung Electronics Co. Ltd.
Vardaman also noted that many of the suppliers of raw silicon in Japan have also been impacted by the quake and resulting infrastructure disruption and said that a reduced supply of silicon could make the BT shortage a mute point—if companies can't get enough wafers, they won't need as much BT.
Amkor, ASE, SPIL, STATS and other chip-packaging houses procure bismaleimide triazine resin. They use the material for chip packaging for a plethora of customers.
As reported, Amkor Technology Inc. said that its manufacturing facility in Kitakami, Japan, located about 260 miles northeast of Tokyo, has suffered relatively minor damage in last week’s earthquake. The Kitakami facility is currently closed due to power supply interruptions and plans are underway to restore production capabilities at the site when power, gas and water supplies, and transportation systems are stabilized.
The Kitakami facility is Amkor’s smallest operation in both units and revenue, generating approximately $10 million to $11 million of monthly sales prior to the earthquake. The Kitakami facility only provides services to a few Japan-based customers.
Regarding the materials issue, Amkor said: 'Japan is a major supplier of semiconductors, silicon wafers, specialty chemicals, substrates, equipment and other supplies to the electronics industry, and the industry is currently evaluating the potential effect of the earthquake on the overall supply chain for electronics. Since the earthquake, we have been in close communication with our customers, suppliers and OEMs to analyze the situation and evaluate alternative sources of supply where appropriate. Like many companies in the semiconductor industry supply chain, we operate with multiple suppliers from different geographic regions. This diversification is intended to help mitigate any potential disruptions from events such as these. However, it is too early to comment on the broader impact the earthquake may have on the electronics industry and our business and operations.'
Advanced Semiconductor Engineering Inc. (ASE) is in the same boat. According to a report from Dow Jones, ASE is also obtaining 'molding compound' from Korea and China. This was after its suppliers in Japan were impacted by the quake, according to the report.