Shortage of supply of core raw materials in the electronics industry

On March 11, 2011, a 9-magnitude earthquake occurred in the northeastern part of Japan. The 6-meter-high tsunami occurred. Miyagi Prefecture and Iwate Prefecture near the epicenter were concentrated areas of Japanese semiconductor raw material manufacturers. Dozens of Japanese semiconductor factories were severely affected by the earthquake. Sony, Sharp, Toshiba and other well-known Japanese manufacturers, factories in the earthquake zone was also suspended production.

As Japan is the world's leading exporter of high-end electronic components, Japan’s major earthquake is having an impact on the global economy. Japan’s dominant electronics industry, such as semiconductor chips, has been severely damaged in this earthquake. The suspension of production of semiconductor raw material plants and chip factories has triggered concerns about the shortage or price increase of electronic components in the Chinese domestic market. The pessimistic expectation of supply shortages and price increases has affected the related electronics companies in the A-share market. The optimistic view is that Japan's post-earthquake production capacity is damaged, which may leave some alternative opportunities for Chinese competitors.

Chip prices rose March 14th, Huaqiang North electronic market comprehensive index [2218.01 0.29%] reported 97.97 points, up 0.79 percentage points from the previous week, a rise of 0.81%. The four major segments, including electronic components, mobile phones, IT and digital products, are all rising.

Although electronic components, including memory, rose only 0.61 percentage points from the previous week, an increase of 0.60%, lagging behind the increase in the composite index, also lagging behind the rise in IT and digital products. However, prior to this, the price of flash memory chips continued to decline. Last year, the average price of 32G and 64G NAND flash memory chips fell by 5% to 8%. Now, the price of flash memory chips has reversed the previous decline.

Huaqiang North China Electronics [0.91 2.25%] market price index is a benchmark for the domestic electronics industry. Shenzhen Huaqiang [10.02-6.36%] North is China's largest and most export-oriented integrated electronics professional trading market. Shenzhen, on the other hand, has gathered a large number of small and large manufacturers in the electronic information industry chain.

Wu Bo, director of data management for Huaqiang Price Index, said that the impact of the earthquake in Japan on electronic components has been initially reflected in the “Huaqiang North China Electronics Market Price Index”, and the memory price index has shown signs of rising.

The earthquake in Japan may trigger the rise of global chip prices because the Japanese chip industry accounted for one-fifth of the global market, among which the Toshiba-SanDisk alliance produced nearly 45% of the world's NAND flash memory (non-volatile flash memory technology developed by Toshiba). NAND flash memory chips are high-end products in storage components. Apple’s iPad and iPhone use Toshiba’s flash memory chips. After the earthquake in Japan, Toshiba once declared that the two factories located in the earthquake zone had stopped production, naturally affecting the nerves of the chip market.

However, TrendForce stated that Toshiba's NAND production line has not been much affected, but Toshiba is still assessing the follow-up effect due to the impact of raw material supply, traffic disruption and Japan's infrastructure construction. Toshiba suffered severe damage from an IC factory in the earthquake zone, but the memory production base in Kansai, Japan, has little impact. Toshiba's joint venture with SanDisk's Flash memory plant is far from the epicenter and no serious disaster has been reported. However, even if the earthquake causes traffic disruption, raw materials and finished products cannot be transported to the airport or port, which may cause the supply of high-end chips to be interrupted or insufficiently supplied in the coming months.

In some Chinese domestic trading markets, the memory components soared rapidly after the earthquake in Japan. Prices of mobile phone and computer memory in Beijing Zhongguancun [9.20 0.55%] electronic city [11.22 0.45%] have generally risen by about 5%. Memory channel, flash chip channel providers are reluctant to sell their minds.

The supply of chip raw materials is tight. However, as to whether the earthquake caused the rise in chip prices, a Shenzhen-based manufacturer of mobile electronic products told the “Investor” reporter that he has not felt much impact at the moment. He believes that prices should rise. However, the price increase should not be too large.

Because the chips used in mobile phones are not particularly large in Japan, unlike LCD panels, which are basically monopolized by Japan. In this regard, there is also a manufacturer that, although many suppliers are localized, but the supplier's upstream suppliers, more than 50% are Japanese. He said that he was most worried about the lack of upstream raw materials, because it will cause the global semiconductor industry to continue to supply tight.

The Japan earthquake hit hardest is the upstream of the semiconductor industry - the supplier of raw materials and wafers. The top two manufacturers of global semiconductor raw materials and wafers are Shin-Etsu and Sumco. There are only a few manufacturers in the world. Production of silicon wafers. The plant of Shin-Etsu is mostly located in the earthquake-affected area. The plant provides 22% of the world's wafer production and is currently in shutdown.

Sumco's factory site is mainly located in Kyushu, but some of them are located in the northeastern region. Therefore, the impact of the earthquake has been relatively light. According to a survey conducted by the special research department of Jibang Semiconductor, for the Japanese semiconductor industry, the supply of silicon wafers will be tight, which will cause the global semiconductor industry other than Japan to have a material-rush effect.

In addition to semi-conductor raw materials and high-end chips, Japanese electronics companies still maintain panels manufactured locally, and LCD panels are less affected.

The research panel of professional panel industry of Jibang Technology pointed out that the main panel factories are in the Kansai area of ​​Japan, and the panel factory itself is less affected. The earthquake did not directly hit the core settlement of the TFT-LCD industry, and the impact on the development of the next panel market was limited.

The impact of the earthquake affected A-share listed companies due to the expected shortage of Japan's core raw material supply, resulting in price fluctuations in the global electronics industry, which in turn brought new cost pressures to companies, and the share prices of downstream companies in some electronic industry chains declined. Lai Bo Gaoke [50.39 1.59%] and Shen Tianma fell more than 3% on Tuesday.

On the other hand, due to the severe impact on the semiconductor industry chain caused by the earthquake in Japan, and the disruption of production by Japanese companies, there may be replacement opportunities for some competitive companies in China. On the two trading days of the week after the earthquake in Japan, Han's laser [24.06-1.72%] rose for two days in a row and gained more than 4.6% in one day. Jianghai Co., Ltd. [31.00-5.05%] rose nearly 6% on Monday, and Sunlord Electronics [26.14-1.36%] rose more than 4.5% on Tuesday.

However, analysts believe that Japan’s industrial competition as an important exporter of high-end electronic materials, equipment, and components may not change.