36% of Semiconductor Fabs at Risk from “Ring of Fire”

By Adrienne Downey

It’s called the “Ring of Fire”. Actually more of a horseshoe shape, the “Ring of Fire” is an area of high seismic activity that extends from southeast of Australia north along the Pacific coast of Asia, crosses south of Alaska, and then continues south along the Pacific coast of all of North, Central and South America. According to Wikipedia, 90% of the world’s earthquakes occur along the “Ring of Fire”, including recent quakes in Japan and Chile. Another 5-6% of the world’s earthquakes occur along the Alpide Belt, which starts along the west coast of Indonesia, continues across the Himalayas, through the Mediterranean, and out into the Atlantic.

According to Semico Research’s Semiconductor Fab Database, 36% of the world’s semiconductor fabs are in high-risk areas in the “Ring of Fire”. These countries include Japan, Taiwan, and the United States (California, Oregon, and Washington). Another 22% are considered at moderate risk. Moderate risk locations include areas of China, Hong Kong, South Korea, Malaysia, Singapore, Thailand, and the west coast of the United States. Risks include damage from both earthquakes and from the tsunamis that sometimes result from them. Semiconductor fabs in these areas must be built using very high standards, and those along the coasts are also vulnerable to floods from tsunamis. Infrastructure is also under risk, such as the power plants in Fukushima, Japan. Companies that supply raw materials to the semiconductor industry are located in this region as well. Assembly and test facilities are also under threat in these areas, particularly in the Philippines.

Looking at the stats from a capacity standpoint, approximately 41% of the world’s total semiconductor capacity is located in the higher-risk areas. Another 34% is located in the moderate risk areas. In other words, 75% of the world’s total semiconductor capacity is under at least some risk from earthquakes and/or tsunami damage from the “Ring of Fire”.

No place in the world is immune from natural disasters. However, in light of the 2011 earthquake and tsunami in Japan, and the recent floods in Thailand, more companies are aware of the need to diversify their manufacturing locations in order to mitigate risk of supply interruptions. Rising costs in the Asia-Pacific region could help make manufacturing in other regions more cost-competitive in the future.

Some in the industry have already taken steps in this direction. The efforts to develop the area in upstate New York are well under way. GLOBALFOUNDRIES just began production at its brand new fab in Malta, New York. It is producing 32nm SOI chips with embedded DRAM (eDRAM) for IBM and will be in volume production in 2H 2012. The fab will be capable of 60,000 wafers per month at full production, with 300,000 square feet of cleanroom space.

On a positive note, semiconductor revenues are expected to increase 8% in 2012, after a flat 2011. There have been numerous challenges to the semiconductor industry over the past year. These changes have impacted the status of semiconductor fabs worldwide: capacity, capex, wafer size, closures, launches, production ramps, technology node migration, and employee count. Economic uncertainty in Europe and the United States has had a dampening effect on semiconductor demand. The devastating earthquake and tsunami that hit Japan in March 2011 proved challenging for a number of large manufacturers in the region. The flooding in Thailand caused problems in the semiconductor and electronics supply chains. Semico’s 2011 Fab Database study provides key information on changes that occurred in 2011, and what plans are in place for upcoming fab construction and closures in 2012-2013.