(Corrects spelling of company name to Siltron in para 13; adds
* Post-quake plant closures could push prices up 20-30
* Quake damage could slow production at Shin-Etsu until
* South Korea's LG Siltron could expand market share
* Smaller chipmakers may be hit by wafer shortages
By Isabel Reynolds
TOKYO, March 25 Supplies of silicon wafers used
to make semiconductor chips could start to run short in May,
following the suspension of operations at two major plants hit
by the March 11 earthquake that devastated large areas of
But several analysts say tightness in the market will likely
be short-lived, given excess capacity and high inventories
before the disaster.
The aftermath of the quake could also prove an opportunity
for LG Silitron of South Korea to make further inroads into the
Japan-dominated industry, worth more than $7 billion in 2009.
Japan's Shin-Etsu Chemical , the world's largest
maker of the chip substrate, has been forced to halt
manufacturing at its largest wafer plant, and has given no time
frame for restarting it.
MEMC of the United States has also stopped a large
plant north of Tokyo affected by the tremor, with no date set
for resuming production.
The companies do not reveal production capacity, making it
hard to judge the impact, but analysts estimate that together
the two sites account for 20 to 30 percent of total global
supply of 300 mm wafers, the current standard.
While large clients such as TSMC of Taiwan likely
have the bargaining power to obtain supply, smaller firms may
face difficulties, analysts say, and the effect could spill over
into production of electronic goods.
"Most clients have enough inventory to cover April, so the
problem will start in May," said IHS iSuppli vice president
Akira Minamikawa, who said prices could rise as much as 20 to 30
percent and the effects of the quake could be a drag on
production at Shin-Etsu for six months.
Silicon wafer production is divided into two processes, the
front-end drawing of the massive silicon ingots, which takes
days, and the back-end slicing and polishing of the wafers.
Shin-Etsu carries out both processes at its Shirakawa plant.
"If they are shaken hard enough, the ingots will drop down
inside the machines, breaking glass components which will need
to be replaced," Minamikawa said.
With so many Japanese factories damaged in the quake, it
will take time to obtain the necessary spare parts, delaying
Shin-Etsu's return to full production, he added.
Problems at Shin-Etsu are likely to prove an opportunity for
other makers, including Japanese rival Sumco , which
many analysts say has spare capacity. Sumco trailed Shin-Etsu in
wafer revenue in 2009, the most recent year for which figures
are available, according to research firm Gartner.
South Korea's unlisted LG Siltron is another likely
beneficiary, especially with the yen close to record highs
against the dollar .
"They're already on a roll in the last year or two," said
analyst Joel Scheiman of research firm MF Global in Tokyo. "The
typical factors cited are a 'Buy Korean' trend within the Korean
market, plus of course a tailwind from the currency ... even
Shin-Etsu has admitted in meetings that LG Siltron has been
increasing its market share."
Shin-Etsu says it is still considering how far it will be
able to cover the loss of production at its other plants. While
wafers for memory chips can easily be produced at any plant in
the world, almost all other types of wafer are more difficult to
produce, according to iSuppli.
"TSMC, because of their scale, would probably be among the
first to be supplied wafers in a tight market anyway," said
Scheiman of MF Global
"The logic would be that some of the smaller customers would
have to worry if things really do get very tight," he said.
(Reporting by Isabel Reynolds; Editing by Michael Watson)