By Jérémie Bouchaud, Director and Principal Analyst MEMS & Sensors, IHS iSuppli
On March 11, Northern Japan experienced the nation’s largest ever recorded earthquake. Given Japan’s significance to the MEMS and magnetic compass industry—nearly a third of the MEMS in value were processed in Japan in 2010 and 97% of the digital compasses—IHS iSuppli’s MEMS and Sensor analysts have assessed the status of key Japanese fabs and the implications for the world MEMS industry.
To summarize the findings, the supply of MEMS and compass remains only slightly affected by the disaster, first, because of the southern geographic location of most fabs, and second thanks in many cases to the responsiveness of the Japanese fabs, and finally because MEMS and compass suppliers have relied on multiple fabrication plants for manufacturing.
In some cases, MEMS suppliers with alternative technology may even make gains against entrenched technologies that have been hurt more severely.
In fact the main effect of the Japanese earthquake on the world MEMS and compass industry is not on the supply side, rather the demand side, as OEMs are in some cases more severely impacted than the sensor suppliers, or bottlenecks elsewhere in the supply chain affect the customers of sensors suppliers.
Caption: Share of world’s MEMS and compass market in value in 2010 processed in Japan, either entire fabrication or part thereof (IHS iSuppli)
32.5% of the MEMS processed partly or entirely in Japan last year
IHS iSuppli has calculated that 32.5% of the value of MEMS sensors and actuators in 2010 were processed, either partly or entirely, in Japanese facilities. This corresponds both to revenues from Japanese MEMS companies and from foreign companies that have their MEMS processed in Japan.
Nine out of the top 50 MEMS IDM and fabless manufacturers worldwide are Japanese companies, including Canon, Panasonic, Epson (#5, 6 and 7 respectively) and Denso (#13) in order of size. Japanese companies sold $1.38 billion worth of MEMS in 2010—21.3% of the world market requirement.
- Japan commands a great share of the inkjet print head market. This category is the #1 MEMS device in terms of revenue in 2010. Epson and Canon held 36% of inkjet revenue in 2010. Panasonic is also producing professional print heads in smaller volumes (source IHS iSuppli Q1 2011 MEMS market tracker).
- A significant part of the world’s automotive MEMS sensors market—23% in 2010—is in the hands of Japanese companies (source IHS iSuppli H1 2011 Automotive MEMS market tracker). Denso and Panasonic jointly lead followed by smaller suppliers including Murata (gyroscopes), Kyocera (Tire Pressure Monitoring Systems), Mitsubishi Electric (accelerometer and pressure sensors), Fuji Electric (pressure), and Nicera (thermopiles).
Not as obvious, Japan is also a strong manufacturing base for MEMS companies headquartered in Western countries. A number of non-Japanese companies including Freescale, Texas Instruments, Knowles, and Goodrich (Silicon Sensing Systems) have a large part of their wafers processed in the country. Major North American MEMS manufacturers depending on these fabs comprise:
- Texas Instruments (#1 MEMS manufacturer in 2010 with $793 million). IHS iSuppli estimates than over 50% of the CMOS wafers for the DLP chipsets came from TI’s Miho fab (North of Tokyo).
- Freescale (#8 MEMS manufacturer in 2010 with $240 million): until recently, over 90% of the MEMS from Freescale came from the Sendai fab, the balance corresponding to some older generation pressure sensors manufactured at the Dalsa foundry in Canada. In 2009 Freescale announced that the 6’’ Sendai fab would close in 2011, and that the MEMS production would be transferred to the 8’’ Oak Hill fab in Texas. Prior to the earthquake, the closure of the fab was planned for December 2011.
- Knowles (#12 MEMS manufacturer in 2010, $189 million) dominates the MEMS microphone market with 87.5% market share in units in 2010 (source H2 2010 Consumer and Mobile MEMS Market Tracker). In 2010, one mobile handset in three was using a MEMS microphone from this company. Currently 100% of the MEMS wafers for Knowles are fabricated in Kagoshima in Japan at its foundry Partner Sony Kyushu Corp.
- Goodrich (#32 MEMS manufacturer in 2010): all the automotive and commercial gyroscopes from Goodrich (aka Atlantic Inertial or Silicon Sensing Systems) used for example at TRW or Mando for vehicle stability systems are manufactured in Amagasaki. The higher performance gyroscopes for defense applications are manufactured in Plymouth, UK.
- STMicroelectronics (#4 MEMS manufacturer in 2010) is fabricating all its sensors and lab-on-chips in house. However its emerging MEMS microphone business is depending on Japan as ST has co-developed the MEMS microphone dies with Omron and these are manufactured at Omron’s fab in Yasu.
“Made in Japan”: 97% of digital compasses
IHS iSuppli took a closer look at another solid-state sensor that is heavily dependent on Japanese suppliers: the digital compass. Global demand for digital compasses is exploding: 263 million units already shipped in 2010, up 354 percent from 58 million in 2009 (source IHS iSuppli H1 2011 Special Report Magnetic Sensors)! By 2015, shipments will rocket to an amazing 1.28 billion.
Digital compass deployments are growing quickly because this device is becoming a standard feature of tablets and cell phones equipped with the global positioning system (GPS) feature. These sensors were employed in Apple Inc.’s iPhone 3 and iPhone 4 brand phones, and can be found in virtually every Android mobile phone. The compass also is a mandatory hardware feature for devices using Microsoft Corp.’s Mobile Windows 7.
Likewise, digital compasses are starting to find their way into gaming—for example, in the Move controller and the upcoming Sony PlayStation Portable (PSP) 2 from Sony Corp.
IHS iSuppli research indicates that 97% of all digital compass manufacturing worldwide in 2010 was conducted in Japan. The world’s top four suppliers of digital compasses are the Japanese firms AKM Semiconductor, Yamaha, Aichi Steel and Alps. STMicroelectronics, Honeywell (for aerospace) and MEMSIC shared the remaining few crumbs last year.
Location of MEMS and compass fabs in Japan
The following map shows the geographic location of the 22 most important fabs for the fabrication of MEMS and compasses in Japan relative to the epicenter of the earthquake, the Fukushima nuclear plant and the power grid areas.
Only three of the 22 fabs were directly damaged by the earthquake, although product delivery at the other 19 fabs could potentially be affected by the same logistical and power supply issues impacting all Japanese industries.
Four fabs are on the South Island Kyushu—sometimes called the Silicon Island—came through unscathed. These include the main fab of lead supplier for the fabrication of compasses AKM in Nobeoka, and the Sony Kyusgu Corp fab that manufacturers 100% of microphones for Knowles. AKM and Knowles both hold over 85% of the world production of digital compasses and microphones, respectively. Yamaha—in 2010 the world’s second biggest compass manufacturer—and auto sensor maker Mitsubishi are also located on the island.
The remaining 18 fabs are located on the main island of Honshu. Noteworthy, there are two separate power networks on this island, as shown on the map. It more or less splits the island into two power zones with a border just south of Tokyo. The region of the earthquake belongs to the 50 Hz zone, and includes the Northeast of the island and Tokyo. The power outage paralyzed not only the fabs for several days but also the public transportation, making it hard for employees to get to work. Southwest of Tokyo uses a grid based on 60 Hz.
Eleven fabs are operating in the 60 Hz area, these are far from the epicenter and were not damaged by the upheaval. In addition these facilities were not affected by the power cuts that followed the earthquakes or the aftershocks. This region includes especially the fabs of the two leading Japanese MEMS sensor makers Panasonic (Fukui) and Denso (Kota) as well as the main plant for the fabrication of quartz gyroscopes at Epson Toyocom, located in Ina. Also Omron (Yasu) that recently started mass production of microphone dies for STMicroelectronics as well as Aichi Steel which is the fastest growing compass supplier in 2011 are also located in that area.
Seven factories are located on the Northeast side of Honshu. Two of these were unaffected:
- Fuji Electric reported issues in the Fukiage and Otawara factories, but not in Hino where the MEMS pressure sensors are manufactured.
- Alps reported issues at all its plants after the earthquake except the Nagoaka fab where the compasses are manufactured.
Caption: Major MEMS and digital compass fabrication facilities in Japan (IHS iSuppli)
Five of these have been affected:
- Freescale’s fab in Sendai
- Canon’s fab in Fukushima
- Texas Instrument’s fab in Miho
- Seiko Epson’s fab in Sakata
- Micronics Japan Corp’s fab (MJC) in Aomori
Status at the 5 affected Northeast fabs
Freescale fab in Sendai
The Sendai fab is located 130 kilometers west of the earthquake’s epicenter and approximately 25 kilometers from the Pacific coast.
As per the April 5th press release, the earthquake caused extensive equipment and infrastructure damage and ongoing safety concerns, while damage to infrastructure and other basic services in the region, compounded by numerous major aftershocks, prohibit Freescale from returning the facility to an operational level required for wafer fab production in a reasonable timeframe. Therefore, the company preferred to close the 150 mm fab in Sendai and to focus its effort on accelerating the transfer of MEMS production to the 200 mm Oak-Ill fab in Texas.
What is the effect on MEMS supply at Freescale?
- The effect is modest on the consumer MEMS business since all the new products introduced in the last 2 years were manufactured in Oak Ill on 8’’, and not in Sendai.
- For automotive sensors which accounted for more than 75% of Freescale’s MEMS revenue last year, the company had already built significant inventory in anticipation of the fab closure to support end-of-life products and the transfer of production to Oak-Ill. Freescale noted in its April 5th announcement that the buffer inventory was not stored at Freescale. Some products were also qualified in the Texas fab and the other automotive products were in the qualification phase at the time of the Earthquake. IHS iSuppli believes that this qualification with Freescale’s automotive customers will now be accelerated to maintain the supply of sensors.
As a result, Freescale was lucky to have already scheduled the shut down of the Sendai fab by the end 2011. The company should be able to maintain its supply of MEMS without interruption for the vast majority of its devices.
Canon’s fab in Fukushima
The factory that fabricates printers and the MEMS print head is in the city of Fukushima, 60 km from the devastated nuclear plant, outside the 20 km evacuation zone.
Production was halted after the earthquake and Canon reported significant damage at the Fukushima plant on March 13th. Rumors started to rapidly spread in various blogs about shortage of supply for inkjet cartridges and print heads. These rumors proved wrong; Canon was able to repair the damage very quickly so that the production of printers and printheads could resume just 11 days after March 22nd and by April 4th the facility was completely operational again.
As a result, the impact of the disaster on Canon’s MEMS revenue over the full year 2011 should remain very modest.
Texas Instruments fab in Miho
The Miho fab is located 65 km northeast of Tokyo and was also damaged. More than a third of the factory’s output consisted of CMOS wafers for DLP chipsets.
On March 27th the company had repaired the infrastructure systems for water, gases, chemicals and air and the cleanroom was re-certified so that initial production lines could resume by the middle of April. According to Texas Instruments full production will resume by the middle of July, though this will not transition to full shipment capacity before September 2011.
Fortunately, Texas Instruments was already using multiple fabs for the fabrication of DLP CMOS wafers chip prior to the catastrophe, including Asian foundries like Dongbu-Hitek (Korea) and internal fabs in Texas. Therefore, Texas Instruments should be in the position to rapidly increase the production at these other fabs to compensate for the disruption of production in Miho.
Caption: DLP chipset manufacturing process flow (TI)
One should also note that the micro-mirror super-structures are processed only in the Dallas fab by chance for Texas Instruments. Finding alternate production sites and transferring processes is relatively easy for the CMOS wafers, by the end of March the company stated it had identified alternate manufacturing sites for 80% of Miho’s work process. It would have been much more challenging for TI if it had to transfer the process for the micro-mirror superstructure.
All in all, shipment of DLP chipsets should be affected in Q2 resulting in some revenue loss, but for the overall year 2011, the supply of DLP chipsets will be modestly affected thanks to the multiples sources already in place.
Seiko Epson’s fab in Sakata
Seiko’s Epson‘s Sakata fab is located approximately at the same level as the epicenter but on the West Coast of Honshu. This is the location for the fabrication of Epson’s print heads but also for the MEMS foundry activity of Seiko Epson for InvenSense’s 3-axis gyroscopes and Akustica’s MEMS microphones.
The factory was not directly damaged by the quake, however the operation was suspended due to an associated power cut. Like its competitor Canon, Epson was able to rapidly resume production of inkjet print heads by March 28th according to a press release on March 31s. Production was halted again with the April 7th aftershock, but the company indicated that it resumed production for printer components in Sakata on April 11th.
The MEMS foundry activity may have been more affected, as Seiko Epson stated that it resumed only partial production for semiconductors on March 28th and April 11th following to the earthquake.
- Note that only the old generation Akustica MEMS microphones are produced at Epson in modest volume (< 5 millions units in 2010) and the company is currently focusing its effort on new generations introduced in March and manufactured at the mother company Bosch in Germany. Therefore Akustica should not be much affected.
- InvenSense’s situation deserves a closer look, however. The start-up has won a number of design wins in tablets and handsets with its 3-axis gyroscopes over the last 6 months and is expanding production requirements rapidly. While IHS iSuppli believes that Seiko Epson was the #1 MEMS wafer supplier for its 3-axis gyroscope prior to the earthquake, InvenSense was already using TSMC and tMt in Taiwan as additional sources for these 3-axis parts. As a consequence, the company did not suffer any major supply interruption for its main product lines.
Micronics Japan Corp’s fab (MJC) in Aomori
MJC is world’s #2 supplier of MEMS based wafer probes for the test of semiconductors. Its fab is located on the extreme Northwest of the Honshu Island.
The facility and equipment was not damaged but the company had to stop operation because of the power cut after the earthquake. MJC resumed operation as early as March 13th. A new power cut due to the aftershock on April 7th resulted in another interruption of production for 2 days, and the company reported that it was back to normal operation on April 11th.
Given the very low volume in this segment – word market below 10,000 wafers per year – there will be no significant impact on MJC’s MEMS revenue in 2011.
Limited impact on the MEMS and compass supply chain
Despite the fact that one third of the MEMS production depended on Japan fabs, and almost all compasses, the impact of March 11th’s disaster will have a relatively limited affect on the world’s supply.
The first reason is the geographic distribution of the key MEMS fabs as shown above.
The second is the company’s responsiveness and their remarkable job in maintaining supply. Canon’s example is impressive, the operation at their printer and print head fab in Fukushima resumed just 11 days after the quake and the fab was fully operational again less than a month after the disaster.
The companies also responded well in the face of the related logistic issues that resulted from the earthquake, the Tsunami and the power cuts. Yamaha for instance reported to IHS iSuppli that its compass factory was in Kagoshima factory on Kyushu Island and was not damaged but that it was addressing logistical problems by changing ports to locations that are not affected by the earthquake and electricity outages.
The fact that many sensor makers are using multiple fabs—internally or external foundries—has also helped mitigate the effect of the disaster. This explained why Texas Instruments, Freescale and InvenSense’s MEMS supply will be relatively unaffected during 2011.
- AKM is also a good example. The company indicated to IHS iSuppli that it already uses multiple fabs, including one external source for the fabrication of its compass. The compass is fabricated using standard CMOS process and the production can easily be transferred to any CMOS foundry in the world.
- Also Epson Toyocom mentioned to IHS iSuppli that the MEMS gyroscopes are fabricated in the Ina fab in Japan (not damaged) but also in Thailand.
Finally, fate played in the hand of Freescale: it benefited from its decision to close the Sendai fab by the end of 2011 and had already built buffer inventory and begun transfer of production to its Oak-Ill fab in Texas. If Freescale had not taken this decision in 2009, the company and its customers would have been severely hurt.
MEMS may win share against alternative technologies following to the earthquake
The MEMS oscillator could be a beneficiary of the earthquake
Japan is the world’s leading producer of quartz crystals and crystal oscillators used in clocks, radios, cell phones, PCs and wristwatches. Unfortunately, certain crystal and oscillator products in Japan are manufactured and produced in locations near the epicenter of the recent earthquakes. Two oscillator suppliers in Fukurawa and Kangawa have confirmed damage as a result of the event, as has a crystal producer for oscillator products.
According to IHS iSuppli Component Price Tracker (CPT)™, and while it is too early to assess the event’s full impact, it is reasonable to assume that there will be a negative impact on this component supply and the overall semiconductor supply chain. As a result of the crisis, key Japanese suppliers including Epson, NDK and Citizen are expected to push out lead times by an additional 4 to 6 weeks on oscillator, crystal and filter products.
This could represent a boon for SiTime and Discera, silicon MEMS oscillators suppliers that are a credible alternative to crystal oscillators. Both have already grabbed market from the quartz oscillator markers in the past 2 years thanks to shorter lead times. SiTime also recently introduced MEMS resonators that can replace quartz crystals.
Non-MEMS Mass Airflow shortage reported
IHS Automotive analysts reported on March 25th on the shortage of Mass Airflow (MAF) sensors made by Hitachi Automotive Systems as a plant north of Tokyo was damaged by the quake. Hitachi supplies about a dozen auto makers and has 60% of the world market.
Car production was affected at GM, Toyota and Peugeot as a result of a shortfall in Hitachi’s MAF sensors. Contrary to Bosch, Continental (former Siemens VDO) and Sensata, Hitachi does not use MEMS technology but platinum hot-wire.
The situation for suppliers in the automotive space of course cannot be compared to dropping in alternative oscillator part in a consumer product. IHS iSuppli does not believe that MEMS parts can be interchanged for hot wire sensors at short notice for reasons of qualification and the constraints of the higher levels of automotive packaging (2LP, etc), so this does not represent a chance for MEMS, or at best for makers of pin compatible hot wire sensors.
Japan’s disaster will affect the demand for MEMS
While Japan will largely sustain the supply of MEMS and compasses, the MEMS industry will be affected to a greater extent on the demand side due to issues at the MEMS manufacturers’ customers, either because the factory of the OEMs that use MEMS have been damaged or because of shortage of key components elsewhere in the supply chain, which may affect the OEM’s production in 2011.
Losses in automotive
In the automotive sector, the OEMs in Japan have been severely hurt by the disaster. Honda has been hit by the impact on its many just-in-time manufacturing partners located the affected zone. Nissan’s Iwaki engine plant has had to close and its reopening is not foreseen before May. Meanwhile Toyota’s manufacturing plants in Japan are working at 50% capacity due to parts availability, which includes electronics. Toyota states it expects to be back to full capacity by year end.
IHS Automotive analysis shows that after an initial rapid lost volume due to damage and outages, stabilization will follow in May and lasting into July as the effects on fabrication plants in the supply chain are repaired or additional parts sourcing issues compensate.
In the second half of the year compensation of the production will stem losses to an extent, although cumulative lost output in Japan at domestic OEMs like Toyota, Honda and Nissan will end at between 3.2 million units by the end of 2011.
What does it mean for MEMS? The loss of nearly 3.2 million units roughly equates to a loss of $60 million for automotive MEMS sensors suppliers. Note that a majority of missing production of 2011 will be recovered in 2012. This will result in a lower automotive sensor growth in 2011 and a significant bump in revenue in 2012.
Consumer demand impact
The demand for MEMS in consumer electronics is also impacted.
- According to IHS iSuppli’s consumer electronics analysts, Japan-based digital camera brands Panasonic, Canon and Nikkon have closed some production lines for DSLR cameras. This can have a temporary effect on the gyroscope demand for image stabilization.
- In gaming, Nintendo stated that it was not impacted. However, the situation is more critical for Sony with limited supply of Blu-ray drive pick-up heads due issues at Sony Shiraishi Semiconductor plant. Shortages may impact shipments of PlayStation 3 consoles in Q2 (source IHS iSuppli “Resident Technology”, March 2011), and this would impact the demand for accelerometers and gyroscopes.
- Apple is not safe either. Sony’s CMOS handset image sensors were impacted and this is likely to cause delays in the upcoming iPhone 5. This is noteworthy considering the considerable impact of each iPhone on the MEMS and sensor industry.
- While Texas Instruments manages to mitigate the impact of the earthquake on its supply of DLP chipsets, the company might suffer more greatly from damage at its Japanese customers that assemble the DLP chipsets into front projectors.
IHS iSuppli has taken into account the effect of the earthquake for automotive sensors and DLP in 2011 in its MEMS Market Tracker Q1 2011. The MEMS and Sensor analysts continue to monitor closely the impact of the Japanese crisis on the supply but also the demand for MEMS for the 3 upcoming H1 2011 market trackers focused on Automotive, Consumer and Mobile, and High Value MEMS.
The MEMS and Sensor team would like to thank its Japanese colleagues Hiroyoshi Takizawa, Akira Minamikawa and Yusuke Maruyama for its help in the preparation of this analysis.