Japan Earthquake To Push Semiconductor Revenue Up: Report

Analyst firm IHS iSuppli on Tuesday said it estimated the world's 2011 semiconductor revenue is expected to grow over 2010 by 7.0 percent to $325.2 billion, up from its estimate of 5.8-percent growth to $320.1 billion from early February.

The increased revenue estimate stems mainly from the 9.0 earthquake and the resulting tsunami which hit Japan on March 11, IHS iSuppli said.

The main contributor to the revised estimate is an increase in expected DRAM revenue of 6.6 percent. IHS iSuppli originally expected 2011 DRAM revenue to drop by 10.6 percent compared to 2010, but now expects that drop to be only 4 percent thanks to a 1.1-percent drop in global DRAM shipments in March and April.

That drop is being caused by disruptions in the DRAM supply chain from the earthquake and tsunami damage, which IHS iSuppli said is causing DRAM prices to hold steady.

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Japan has two DRAM fabs, but they were not damaged by the quake. However, Elpida Memory's chip assembly plant in the earthquake area was damaged, causing shipments to fall, the analyst firm said.

Another potential problem for DRAM production is damage to 300-mm wafer production in two plants operated by Shin-Etsu. IHS iSuppli said those two plants together account for about 20 percent of the world's wafer production, and damages there could have a major impact on memory production, wrote Mike Howard, principal analyst for DRAM and memory at IHS iSuppli, in the report.

“If these supply problems persist, manufacturing efficiency will be impacted when raw wafer inventory is depleted," Howard wrote. "When the number of wafers in the manufacturing supply chain declines to less than 50 percent of typical levels, then DRAM output will be impacted. This could happen starting in October, resulting in further price increases for DRAM.”

While production of most of the IT products and the components which go into have moved from Japan to other countries including Korea and China, Japan is still a key supplier of semiconductors and semiconductor components.

In addition to DRAM wafers, other IT components damaged by the earthquake and tsunami include gasses and color filters used in LCD panels as well as cells used to produce batteries for mobile PCs.

Production of certain components such as LCD panels in factories outside the earthquake impact zone have also taken a hit from power blackouts which, even if short-lived, require recalibrating the production lines.