Earthquake Impacts Semiconductor Industry

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The epicenter of the earthquake was off the coast of honshu, Japan's main island.

The earthquake that struck off the coast of Japan's main island, Honshu, was magnitude 8.9. It is a major human disaster that will also have significant near and long term affects on the electronics industry. The earthquake is significantly more powerful than the 1999 earthquake in Taiwan that caused significant damage in Taipei. It was only 7.8 on the Richter scale. Likewise, the 1989 Loma Prieta earthquake was a 6.9, 100x less powerful than an 8.9, and it halted production in Silicon Valley.

The world is just starting to come out of a global recession and has been hit with major unrest in the middle east causing rising energy costs. The earthquake will likely have a negative impact as well given Japan's importance to the electronics industry. I spoke with Jim Handy of Objective Analysis to find out how the earthquake will impact the semiconductor industry.

Wong: Have there been other earthquakes in Japan that have affected the semiconductor industry?

Handy: Other earthquakes in Japan that have caused concerns to the semiconductor industry have been far smaller than today's. This includes a 5.9 magnitude earthquake in September 2008, two measuring 6.0 and 6.8 in July 2007, and one measuring 6.9 in March of 2007.

Keep in mind that the Richter Scale is a logarithmic scale. My concern isn't just for little ole semiconductor folks but you've got a large land mass that will have significant infrastructure problems and long-term rebuilding problems. What do you do when all the glass within a 500 mile radius is broken? Who's going to rebuild all those ceilings? Check all those supports? Manufacture the fresh drywall? First you have to secure the electricity and water distribution system.

California, pay attention - this may happen to you one day!

Wong: How much affect will this disaster have on Japan's ability to support the electronics industry?

Handy: It appears that earthquake and subsequent tsunami have had a significant negative impact on the infrastructure including the semiconductor industry.

Wong: What aspects of the semiconductor industry does Japan have a major impact in?

Handy: Japan manufactures 40% of the world's NAND flash and roughly 15% of the world's DRAM. It is a significant source of chips to support consumer electronics devices as well. Even a two-week shutdown will remove a sizable share of each of these from production. It doesn't take a large production decrease to cause prices to increase dramatically as shown by similar effects in oil costs.