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Power main concern in Taiwan

Power main concern in Taiwan

Power shortages remain the greatest threat to componentry supply out of earthquake damaged Taiwan with manufacturing plants in the Science Park of Hsinchu province only slighted affected, Acer marketing director Charles Chung revealed last week.

Chung, who was in Taipei when the earthquake devastated the central city area, revealed the province where many IT manufacturers are located escaped mostly unscathed.

"The Science Park in the north of Taiwan, where our facility is, was not damaged." The Science Park is home to 28 wafer fabrication plants, including Taiwan Semiconductor Manufacturing, Powerchip Semiconductor and Windbond Electronics.

The quake did however damage power supplies to the Science Park and it's the lack of electricity that will cause product shortages, Chung said.

With rationed power, manufacturers face huge problems producing silicon products such as RAM and Chip sets. Chung expects supply of VGA cards, hub sets, communication products and motherboards will also be tight.

Keith Hamilton, country manager for memory manufacturer Kingston Technology, suggested that even though the structures remained intact, equipment damage and the human toll would adversely affect supply out of the disaster-stricken country.

It would also take several days before the safety of the buildings was established. Additionally, the sensitive nature of DRAM chips means that aftershocks and power outages could cause low yields, further delaying the industry's recovery. "According to Bloomberg LP, the Hsinchu Science Park alone has incurred losses of $US31.4 million but I expect that figure needs to be revised upwards," said Hamilton.

IDC is predicting that the output loss will be about 20 million units of 64MB RAM. The notebook market, already burdened with LCD screen shortages, will continue to feel the squeeze as the construction of six new LCD plants in Taiwan has been delayed. The largest supplier of notebooks in the world, Taiwan will also ship about 90,000 notebooks less this quarter, with the threat of manufacturers going elsewhere. Overall, IDC estimates the PC market for the quarter will decline by about 3 per cent.

Manufacturer losses and the inevitable shortages of memory from a region IDC touts as responsible for 10 per cent of worldwide RAM output and 60 per cent of the world's motherboard supplies, mean already high memory prices will continue to climb. Hamilton reported that Kingston has experienced a spike from $4 for an 8 x 8 PC 100 chip to over $15 in just eight weeks. "This will continue to spike until the full damage is known," said Hamilton.

Robert Mitrovic, production manager of Integrated Memory Solutions, saw the price of memory go from $US18.80 to $US19.50 in one afternoon last week. Possible replacements in the form of EDO chips are also experiencing shortages and price increases, going from $US2.90 to $US3.70. "Once you find a supplier you need to jump in right away, otherwise those chips will be gone in an hour," said Mitrovic.

Mitrovic is not expecting prices to decrease at all, in fact he anticipates they will reach the $US25 mark before they even stabilise.

Rick Phelps, national consumer sales manager for Melbourne-based distributor Prion, said they have not received any official notification from vendors about stock shortages.

Yet he believed the earthquake has affected both Hewlett-Packard and Toshiba. Toshiba's national marketing manager, Mark Whittard, denied the notebook vendor would have problems with supply. Whittard explained the majority of Toshiba's manufacturing is done in Europe and China and only second-tier suppliers are in Taiwan. He did agree with reports there may be shortages with TFT screen technology.

Maurice Famularo, from networking distributor D-Link, noted D-Link's component suppliers were not badly hit by the big shake but said the lack of power is of major concern. "We'll have a slight shortage with products in the networking categories but we have enough stock in the warehouse which should last about 2 months."

Mitrovic also estimated that it would be at least two weeks until production in Taiwan begins again. At present, manufacturers are not even getting enough power to test their equipment. "We won't see the total effect of this for at least a month. As hard as it is now it will get a lot worse," added Mitrovic.

Chung predicted things would return to normal by mid November provided Taiwan's power company can fulfil its promise of regular electricity.

He said the power company had assured the industry it would give them continual power by Monday of last week by setting up temporary transmission stations so power can be returned to the business district in the north.

However, according to Frank Sheu, managing director of Synnex, the Science Park is experiencing daily power blackouts of up to five hours.

Famularo expects supplies from Taiwan to be back on track by mid-October, "providing they don't have another earthquake".

Hamilton believes Christmas is a more realistic timeframe, assuming that it will take DRAM manufacturers who recently reduced production due to the continually falling prices of memory eight weeks to reach optimum capacity once more.

And even if some manufacturers and suppliers are attempting to downplay the global ramifications of the quake, the stock market has no such qualms.

Korean DRAM market leaders Hyundai Electronics Industries and Samsung Electronics both experienced dramatic increases in their stock prices. European manufacturers underwent similar valuations. "Korea and Japan are in very strong positions to ramp up production," said Hamilton.

Meanwhile D-Link, in conjunction with the Taiwan Embassy and Westpac, has set up a disaster relief fund for victims of the earthquake who are associated with the IT market in Taiwan. D-link has promised to donate 5 per cent of its October revenue to the fund, estimated to be around $75,000. Famularo has challenged all IT companies to match or better D-Link's donation.


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