Chip plants resume output as governments invest

Semiconductor production has resumed at plants in China and Japan following unplanned outages that had intensified a shortage in inventories at consumers, as governments look to address long-term supply chain development.

Japanese conglomerate Toshiba confirmed today that it has resumed production on the 150mm wafer production line at its Japan Semiconductor operations in Oita, Japan after an earthquake on 22 January disrupted output. The company said it will expedite repairs and replacement of damaged parts on the 200mm production line to return it to full capacity. The plant produces system LSI chips for automotive manufacturers. The Buzen Toshiba Electronics plant in Japan is operating at its usual capacity.

And South Korea-based Samsung said that its semiconductor manufacturing facilities in Xi'an, China, which have been affected by a Covid-19 lockdown, resumed full operations today.

Outages at various semiconductor plants across Asia related to Covid-19 lockdowns or natural disasters have exacerbated the ongoing shortage in the global semiconductor supply chain. The US Commerce Department said yesterday that a request for information from the industry found that the median inventory held by semiconductor consumers, such as carmakers and medical device manufacturers, dropped to less than five days in 2021, from 40 days in 2019.

"If a Covid outbreak, a natural disaster, or political instability disrupts a foreign semiconductor facility for even just a few weeks, it has the potential to shut down a manufacturing facility in the US," the department said. Demand for semiconductors was as much as 17pc higher in 2021 than in 2019, but supply has not kept pace with the increase. Most semiconductor manufacturing facilities are operating at or above 90pc utilisation rates, leaving limited scope for production to ramp up.

Supply bottlenecks are most concentrated in areas such as legacy logic chips for vehicles and medical devices, analog chips for power management, image sensors, and radio frequency (RF) devices and optoelectronics chips for sensors and switches. There is a lack of raw material inputs for semiconductors as well as other components needed to assemble sub-parts for electronic devices, the department said.

In its earnings results yesterday, US semiconductor manufacturer Texas Instruments said it expects demand for analog and embedded technologies from its industrial and automotive customers to continue to result in increased semiconductor content for applications, driving faster growth than in other markets.

Texas Instruments is investing in two 300mm wafer fabrication facilities in Texas and Utah that will come on line in 2022 and 2023, respectively. And the company plans to start construction this year on two 300mm fabrication plants at a site in Texas that has the potential to expand to four plants with an investment of $30bn to support demand growth from 2025 to 2035. And US-based Intel said last week that it will invest more than $20bn to build two chip plants in Ohio. US president Joe Biden has proposed investment of $52bn to support the expansion of the country's semiconductor industry to address the long-term supply challenge.

Other governments too are investing in capacity to ease the supply shortage. China's National Development and Reform Commission and Ministry of Commerce today announced a plan to set up a special economic zone in Shenzhen to attract international investment in the semiconductor industry and provide market access for trading electronic components.

In South Korea, the government yesterday passed the National High-Tech Strategic Industries Special Act to provide an investment support package including expedited processing of approvals, support for industrial infrastructure in specialised complexes, fund creation and tax credits.

The South Korea Ministry of Science and ICT has announced a series of investments this month, including a 90.4bn won ($76mn) Action Plan for ICT Strategic Technology Development for quantum computing, supercomputing, next-generation semiconductors, and superconductors. Last week the ministry announced a 402.7bn won investment in developing processing-in-memory (PIM) chips, in addition to a 1trn won investment in artificial intelligence semiconductors over nine years to 2029. And today the ministry announced the Digital New Deal Action Plan 2022 with a 9trn won investment.

Saudi Arabia's Aramco is looking to capitalise on the rise in demand too. Japanese semiconductor manufacturer Yokogawa Electric announced today that it has signed an initial agreement with the state-owned energy company to collaborate on setting up chip manufacturing in Saudi Arabia.

By Nicole Willing