Japan Quake Imparts Minimal Damage, This Time…

The recent 7.1 magnitude earthquake struck Japan, causing only minor electronics production and logistics disruptions. However, the event spurred concerns over the potential impact that a larger quake could have on the global electronics supply chain.

The quake struck the southern island of Kyushu, with the Miyazaki Prefecture on the east coast experiencing the highest intensity. The event injured 15 people and spurred a tsunami warning.

According to the United States Geological Survey (USGS), the region experienced an intensity of level VII, indicating powerful shaking with moderate damage.

In response to the event, the Japanese government issued its first-ever warning of a potential forthcoming “megaquake” that could have a magnitude as high as 9.1. The warning was lifted after a week and wasn’t meant to signal an imminent earthquake but rather to indicate that there is up to an 80% chance of an eight or 9-strength shaker along the Nankai Trough, a seismic expanse that spans most of Japan’s Pacific coast.

In the Zone

Over 20 component-related facilities, including semiconductor manufacturing on wafer sizes ranging from 100mm to 300mm, are within the central impact zone. 

• ASICs and SoCs
• Tantalum and ceramic capacitors 
• CMOS and CCD image sensors 
• Discrete ICs, including diodes and transistors (notably SiC power devices and IGBTs)
• LEDs
• MEMS sensors
• Microcontrollers
• Microprocessors
• Standard analog and logic

No Significant Disruptions

Operating or planned fabs are located in the region and are owned by Japanese and overseas chip suppliers, including Nichia, ROHM, Showa Denko, Sony, TSMC, Canon, Toshiba, and Mitsubishi. KYOCERA AVX and SUMCO also operate plants in the area.

Including those named above, many electronics supply chain companies did not issue statements of operational repercussions. However, as of August 20, more clarity and additional details have emerged. 

The leading foundry, TSMC, stated that its Kumamoto plant reported no significant damage and is expected to maintain its production schedules. TSMC reported no significant damages and projects that its production schedules will not be affected for its new fab (12 and 16-nanometer) slated to ramp in Q4 in the city of Kumamoto in Kumamoto Prefecture, which experienced a 4.4 jolt on the USGS scale, compared to Miyazaki Prefecture which suffered 6.5 and more significant shocks.

KYOCERA AVX stated that some production equipment in two of its factories had been damaged in Kagoshima Prefecture (5.9 intensity on the USGS scale), and production of certain products was halted. One site produces general-purpose MLCCs for consumer and automotive applications; the other is an R&D center for advanced materials. Any initial interruptions have been rectified, and operations have resumed.

The second-largest silicon wafer manufacturer with over 20% global market share, SUMCO, temporarily suspended operations in its Miyazaki production facility, but production was restarted in phases. Five of seven other production sites for SUMCO in Fukuoka, Nagasaki, and Tokushima Prefectures endured intensities of 3.7 to 3.3 on the USGS scale; one makes quartz crucibles essential to growing silicon crystals.

ROHM produces sensors, tantalum capacitors, and other products in its Apollo Chikugo plant in Fukuoka Prefecture. In late 2023, it acquired a plant identified as its main production site for SiC power devices, located in Kunitomi-cho in Miyazaki Prefecture. ROHM registered 5.6 on the USGS scale. It has yet to report any difficulties.

Sony Semiconductor Solutions characterized impacts as insignificant across three production plants, including its Kagoshima Prefecture location, which produces mainly MEMS and image sensors. 

Japan Electronic Components Manufacturing

The Asia-Pacific region hosts over 55% of all operating semiconductor fabs globally, and Japan represents almost 30% of those with well over 100 production sites. Japan is also home to various IC substrate makers, including Daishi Denshi, SHINKO, Ibiden, TOPPAN, Meiko, and SIMMTECH.

One of the top global outsourced assembly & test providers, AOI Electronics, is Japan-based. It has two plants, Takamatsu and Kanonji, in Kagawa Prefecture, north of the impact zone. Additionally, indirect commodities such as the aforementioned IC substrates and other raw material inputs for the electronic component supply chain. According to the Ministry of Economy, Trade and Industry (METI) – Japan produced 1.1 million metric tons of resins and over 26 billion ceramic packages and substrates for passive components.

By the Numbers

Japan is a critical player in global consumer electronics, components, automotive, and other supply chains, yet only accounts for less than 10% of global semiconductor production. According to its Ministry of Economy, Trade and Industry (METI) – semiconductor production, as categorized by the government body, fell by 25% in 2023 versus 2019, and total metal-oxide IC unit production shrunk by 34% for the same period, the COVID-19 pandemic and economic challenges notwithstanding.

Japan’s share of global semiconductor net billings, as forecast by WSTS, will decline by 1.5 percentage points in 2025 versus 2023.

However, based partly on recent government incentives, the WSTS spring 2024 forecast is for semiconductor billings to grow 9% year-on-year in 2025. The combination of eight domestic companies, including Toyota and Sony, with some 590-billion-yen ($3.89 billion) in government investment into Rapidus Corporation to keep pace with leading-edge (< 7-nanometer process nodes) semiconductor production. Formed in 2022, Rapidus is racing toward mass production of 2nm chips by 2027.

Developing leading-edge capabilities is more profitable for Japan and the rest of the world and a way to defend against losses from China’s expanding portfolio of mature process nodes, including Arm-based MCUs and analog ICs, that support its home and export markets. China is endeavoring to shift its reliance on foreign mature node products in the next two years from as much as 85% share for foreign makers to 50% to 60% for domestic producers.

Next Time…

While the megaquake advisory from the Japan Meteorological Agency was withdrawn, the warning raised fears over the effect of such a massive seismic event. Japan has experienced past megaquakes, with a 2011 Tokoku temblor off the coast of northeastern Japan registering 9.1 on the Richter magnitude scale. 

That seismic event and resultant tsunami unscored Japan’s integral role in the global semiconductor supply chain and highlighted this vulnerability when MCU-producing sites for a single supplier in Ibaraki, Gunma, and Yamagata Prefectures disrupted the entire automotive industry for several calendar quarters.

The impact on the global electronics supply chain would be severe if another jolt of 8 or more intensity occurred in Kyushu. With its location on the Pacific Ring of Fire, Japan is one of the most earthquake-prone countries in the world, with the USGS noting that the nation has the densest seismic network on the planet. 

Though the latest, but certainly not the last, Japan-based earthquake has no appreciable adverse effects on electronic component market conditions – the shake-up should serve as a wake-up (call) to global commodity management and procurement teams to revisit supply assurance and cost risk plans before the next time…