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More quake threats loom over IC industry
11 May 2011, News

Researchers estimate that there are about 80 000 earthquakes globally each year, with most being too minor to notice. Since the earliest days of IC production in Silicon Valley, the IC industry has always had the majority of its fabrication facilities located in seismically active regions. Moreover, it appears that over time, the IC producers and their customers have just come to accept this situation as a fact of life.

Figure 1 shows that in 2010, almost two-thirds of worldwide IC industry capacity was located in seismically active areas. As shown, Japan and Taiwan had essentially the same level of IC capacity in 2010, and, with both countries considered entirely seismically active, had the same amount of IC capacity exposed to potential earthquake damage.

Figure 1
Figure 1

As shown in Figure 2, fully 90% of pure-play IC foundry capacity is located in seismically active regions. Since the two largest IC foundries in the world (TSMC and UMC) have such a significant presence in Taiwan, a disastrous earthquake or typhoon in that country would have serious ramifications for the entire electronics supply chain. In fact, it is IC Insights’ opinion that because IC foundries have so many different customers and are sole-source producers for such a wide variety of part types, the ramifications of damage to IC foundry fabrication facilities would be much greater than damage done to individual IDM IC fabs.

Figure 2
Figure 2

IC Insights was once contracted to perform a proprietary market research report for a large insurance company. This company wanted to develop a model that showed how much in electronic system sales would be lost if the IC fabs in Hsinchu, Taiwan (just one of the Science Parks in Taiwan) were shut down for one, two or three months due to damage caused by an earthquake or typhoon. The bottom line of this report was that for every month the IC fabs in Hsinchu were shut down, the electronic system industry would lose at least $10 billion in sales.

Although the IC industry has always had the majority of its fabrication capacity located in ‘dangerous’ areas, most buyers of ICs do not give this a second thought. Ultimately, all that really can be said about the ability to predict devastating natural disasters is that everything is just fine until one day it is not. However, while these tragic events are impossible to predict, they are not impossible to plan for. IC Insights believes that the 11 March 2011 Japan earthquake might just be the wake-up call that spurs the entire electronics supply chain to create new contingency plans, just in case.

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