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Semiconductors

Samsung and Renesas rush to restore chip production by summer

Shortage to persist despite resumption of deliveries halted by storms and fire

Samsung Electronics expects shipments from this semiconductor plant in Texas to return to normal as early as June.  (Photo courtesy of Samsung Electronics)

TOKYO/SEOUL -- Samsung Electronics looks to regain full output at its Texas semiconductor plant this summer, one of several major chipmakers recovering from unforeseen disruptions that have amplified the global shortage.

The South Korean company recently restarted the plant in the city of Austin at minimal output to calibrate production processes for normal operations. The facility was forced to shut down in February due to a statewide blackout that resulted from severe winter weather.

Samsung, which has also dealt with a delay in replacing chipmaking equipment components, aims to complete the restoration in May, with the volume of deliveries expected to return to pre-blackout levels as soon as June.

In addition to chipmakers affected by the weather-related disruptions in Texas, Renesas was forced to halt production at plant in Japan due to a fire. The process of making semiconductors normally takes two to three months. Halting production necessitates the disposal of silicon wafers and other intermediary material.

Samsung received notification before the Texas blackout, helping the company to limit the damage. But the lengthy plant stoppage has exacerbated an acute supply shortage.

The Austin plant produces chips on order for smartphones and other products. Clients include California-based Qualcomm. The pause in the plant's production will cause a 30% drop in global output of 5G phones during the second quarter, Taiwanese market researcher TrendForce estimates.

Germany's Infineon Technologies, the leading supplier of automotive semiconductors, has operations in Austin, as does Dutch No. 2 player NXP Semiconductors. The plants account for 6% of Infineon's total production capacity and 10% for NXP, according to British data provider Omdia.

Infineon and NXP were forced to shut their Austin plants in February. Infineon looks to restore deliveries to pre-blackout levels in June.

In Japan, a fire at Renesas Electronics' Naka plant in Ibaraki Prefecture forced a stoppage in March. The facility will restart Saturday and Sunday at minimal output. The fire occurred at a building that made semiconductors for automobiles. Renesas plans to resume deliveries at normal levels by around the end of June.

Renesas' production of automotive chips was disrupted by the fire. (Photo courtesy of Renesas)

But restoring these chip supplies disrupted by disasters will not allay uncertainties among clients, as they faced a supply crunch even prior to the plant stoppages.

"The shortage in supplies will last at least until 2022," said Kazuhiro Sugiyama, an official at tech consultancy Omdia.

Nissan Motor has furloughed workers at a U.K. plant since March as part of a push to adjust the size of its active workforce in response to a potentially long-term semiconductor shortage. Nissan told suppliers through Friday that it plans to deepen production cuts in Japan.

Volkswagen, General Motors and Honda Motor are among the auto manufacturers that have been forced to halt factory operations or reduce output.

The impact from the semiconductor shortage will last six months, the Washington-based Alliance for Automotive Innovation projected earlier in April.

Automotive industry revenue will decline $60.6 billion this year, U.S. consultancy AlixPartners estimates. The chip crunch will disrupt production of 2.2 million to 2.4 million vehicles, AlixPartners said, equating to 3% of global output. The number of semiconductors found in a single vehicle climbs every year, which compounds the fallout from tight chip supplies.

Demand for semiconductors continues to grow. The market from data centers and personal computers will reach $180.7 billion in 2024, according to Omdia, expanding 10% from 2020. The automotive semiconductor market is projected to jump 64% to $53.6 billion.

Samsung and fellow major chipmaker Taiwan Semiconductor Manufacturing Co. are scrambling to ramp up production, but they have not kept pace with the uptick in demand.

The growing sophistication of the technology involved in producing chips requires vast investment. Spending at advanced plants can top $9 billion, and only a few chipmakers are able to cover those costs.

Automakers and other manufacturers are engaged in a mounting tug of war for securing supplies from chipmakers. Chip deliveries to U.S. appliance maker Whirlpool fell 10% short of orders in March, the president of the company's Chinese arm told Reuters.

Makers of TVs and other electronics are at a disadvantage since they use integrated circuit products that carry low unit prices.

"They're experiencing the ill effects of semiconductor makers stepping up production of automotive products," said an industry source.

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