“Japan produces around 20-25% of world IC production, the biggest of which is Toshiba/SanDisk, one third the Japan total but half the world’s NAND Flash production,” says Penn.
“A microsecond power supply glitch wiped out production at one of the Toshiba factories just before Christmas, a more serious interruption would bring the NAND market to its knees, especially as no-one holds inventory any more – ‘It’s too expensive’ scream the bean counters and Wall Street – until you can’t get it!”
“If Tokyo was affected (as it was) then there’s a whole swathe of fabs north (Kawasaki) and south of the city (Yokohama /Kanagawa) on the East coast that could have taken a ‘hit’ which will almost certainly have killed whatever was being processed at that time,” adds Penn, “that will impact IC supply availability in Q2, how bad depends on what and how much was hit.”
“It’s (yet another) a red flag warning though: ‘Don’t put all your eggs in one basket’. How many more warnings do the balance sheet-driven CEOs and CFOs need? You can fiddle with your spreadsheets all you want but the bottom line is: If you can’t get the wafers, you will have zero sales; 100% correlation,” continues Penn, “and if everyone buys from the same (now very limited) source; the risks of a problem are getting higher and higher.”
“What if Korea had been hit?” asks penn, ” Korea is just under 20% of world production, 90% of which is DRAM – two thirds of the world total – that would kill that market dead.”
“What if Taiwan had been hit?” he queries, “Taiwan is similar in size to Japan but builds ‘all’ the world’s advanced logic and SoCs, that would kill all of the fabless firms: Qualcomm, Broadcom, Marvell, MediaTek, Nvidia, Xilinx,etc stone dead and mortally wound all of the fablite IDM defectors – TI, Renesas, ST, Infineon, NXP, Freescale etc.”
“Once again”, concludes Penn, “the sheer stupidity, short-term thinking and (easy profit-motivated) shallow-minded corporate lemming-speak sense is back centre stage and under the spotlight!”