UPDATE 4-Japan quake hits Toshiba chip plant, shipments

Fri Mar 11, 2011 9:39pm EST

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* Toshiba-SanDisk chip facility briefly shuts production

* Analysts eye higher memory prices

* Toshiba warns of logistics risks

* Micron shares jump (Adds detail on Freescale plant)

By Noel Randewich and Paul Sandle

SAN FRANCISCO/LONDON, March 11 (Reuters) - Japan's biggest-ever earthquake halted production briefly at Toshiba's chip plants on Friday and could delay crucial shipments, although partner SanDisk said output losses were minor.

The 8.9 magnitude earthquake -- the largest ever on record, killing over 1,000 people -- is expected to pinch microchips supplies from Japan, where a fifth of the world's semiconductors are made.

Micron Technology Inc (MU.O) shares jumped 3.2 percent on expectations prices for NAND flash memory used in smartphones and tablets will rise in the quake's aftermath. SanDisk Corp (SNDK.O) shares rose 1.8 percent, but gave up most of its gains by the close.

Toshiba Corp (6502.T) and SanDisk share cutting-edge facilities in Yokkaichi, where they make NAND chips increasingly in demand by Apple and other mobile device makers.

A SanDisk spokesman told Reuters some silicon wafers in the delicate manufacturing process had been spoiled, while Toshiba warned of delivery delays due to problems with road, rail and other transportation.

"All it takes is a little vibration to screw up wafers," said said Kevin Cassidy, an analyst at Stifel Nicolaus. "We would expect NAND flash prices to increase on this."

A separate Toshiba plant in Awate appears to have been affected by a power outage and all are being inspected for damage, Toshiba said in a statement.

Japan is a major electronics manufacturer, accounting for 14 percent of the global production of computers, consumer electronics and communications gear last year, according to IHS iSuppli.

In the coastal city of Sendai which was hit by a 10-meter (33 feet) high tsunami following the quake, employees at a facility owned by Freescale, which makes chips for Amazon.com Inc's (AMZN.O) Kindle electronic reader, were evacuated and the plant has closed.

"A global team is now working 24/7 to assess the impact," Freescale spokesman Robert Hatley told Reuters.

Also due to the quake, Sony Corp (6758.T) shut six factories, two in Fukushima and four in Miyagi, including a plant making laser diodes used in DVD, Blu-ray players and Playstations. Panasonic Corp (6752.T) also halted production. [ID:nL3E7EB0X4]

Boise, Idaho-based Micron has had no reported problems or production interruptions at its DRAM chip plant in Nishiwaki, its only facility in Japan, spokesman Dan Francisco told Reuters.

Demand from Apple Inc (AAPL.O) and other manufacturers for NAND memory, used in mobile gadgets to store songs, photos and other media, is already expected to rise this year and any production setbacks could push prices higher.

"SanDisk continues to assess the situation for any potential future impact that may arise from issues related to Japanese infrastructure and the supply chain," the company said.

SUPER-SENSITIVE

Underlying the sensitivity of high-tech manufacturing, a split-second power interruption at Toshiba's NAND facility threw off production in December and forced the company to warn that its output could be cut by 20 percent in the following two months.

Any delivery slowdowns Toshiba's plants would be seen as positive for Micron.

"Micron -- you would anticipate and the stock said that today -- would be a beneficiary of both lower supply for the industry, which is pricing leverage, as well as lower supply from a competitor, which is share gain," said JMP Securities analyst Alex Gauna.

Toshiba supplies more than a third of the NAND memory chips used worldwide in devices such as Apple's iPad.

Analyst Mark Harding at Maxim Group in New York said the disaster would clearly have a negative impact on Sony, although it was too early to say to what extent.

"From the onset, it's going to be marginally negative and the longer it takes the worse it's going to be," he said.

However, the impact would be slightly mitigated because Sony had moved some manufacturing outside Japan and the disruption had not come at a peak time.

"At this time, it's typically the seasonally slower period in terms of consumer consumption," he added. (Reporting by Paul Sandle and Noel Randewich; editing by Phil Berlowitz, Andre Grenon and Bernard Orr)

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