Japanese Plant Fire Adds To Carmakers’ Chip Supply Woes

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Major fire at Renesas semiconductor facility in Japan shuts down production for a month, adding to car chip supply shortages

Shares in Renesas, one of the automobile industry’s biggest semiconductor manufacturers fell on Monday after the company said it would be forced to halt production at one of its factories in Japan due to a major fire.

Renesas said on Sunday that the fire had affected one of the two “clean rooms” at its main plant in Hitachinaka, northeast of Tokyo.

While the second clean room was unaffected, the company said production could not be restarted at the plant until the damaged first-floor facility was repaired.

The Nikkei Asia estimated that it could take more than three months for production to return to previous levels.

ASML's TWINSCAN NXE:3400B semiconductor lithography tool. ASML
Image credit: ASML

Major fire

The fire broke out on Friday at 2:47 a.m. local time, and took more than five hours to bring under control.

Caused by a plating tank catching fire due to an electrical overcurrent, the incident damaged a production line that produces the latest 300mm wafers.

Renesas said the disaster would have a “significant” impact on its ability to produce chips.

The company said it only has about one month’s worth of inventory, which is lower than normal, due to a February earthquake in Fukushima Prefecture that halted production at the same plant.

Shares in the company dropped 4.9 percent in Tokyo trading on Monday, while shares in carmaker customers also fell, Toyota dropping 2.6 percent, Honda 3.6 percent and Nissan 3.7 percent.

The incident comes at an inconvenient time for the global car industry, which is already seeing chip supplies squeezed by the Covid-19 pandemic and other events.

Production slowdown

NXP Semiconductors and Infineon, the world’s No. 1 and No. 3 chip suppliers to the auto industry, were forced to shut down factories in Texas due to a February cold snap.

Meanwhile, US trade restrictions on Huawei, SMIC and others have caused the Chinese firms to build up stockpiles of their own, further squeezing supplies.

A drought in Taiwan is also affecting chip production in the country, reducing the supply of water needed for semiconductor manufacturing processes.

Carmakers had reduced orders early in the pandemic due to reduced demand, and by the time orders increased again in late 2020 they had been squeezed out by consumer electronics and computer firms, for whom Covid-19 has caused a demand to spike.

As a result of the situation many carmakers have slowed production or temporarily shuttered plants.

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