The magnitude 9.0 earthquake centered 81 miles east of Sendai, Japan on March 11, 2011 was one of the strongest earthquakes on record. The earthquake, and particularly the tsunami which followed, took many lives and caused tremendous damage to the Tohoku (northeast) and Kanto (east) of Japan.
With the disaster occurring on a Friday afternoon, and being followed by much more serious concerns regarding the safety of a nuclear power plant, it has been difficult to assess the impact on Japanese manufacturing. The impact to the TFT LCD industry is a concern for many. So far, information is limited and needs to be confirmed. However, as of Monday morning in Japan, we have obtained the following information and understanding of the potential impacts to the FPD industry.
Some TFT LCD factories located in the impacted area, including Hitachi Display (Chiba prefecture), NEC’s Gen 2 (Akita prefecture), Toshiba’s Fukaya and Ishikawa factories, as well as Epson’s Gen 2, were reportedly not damaged by the earthquake. But it is very likely that these factories have paused production to gauge the impact and calibrate the facilities. These factories are all focused on small/medium panels, and their share in the industry is very minor. We are assuming that there will be no major impact to the TFT LCD industry as a result.
The majority of the TFT LCD industry is not located in the area most heavily impacted by the earthquake. Sharp’s Gen 8 and Gen 10, Panasonic LCD’s Gen 8, and NEG’s glass tanks are all located in the Kansai area, which does not appear to have been affected by the earthquake. Key LCD component makers, like Nitto Denko, DNP, Sumitomo, Toppan, and Corning, have located most of their facilities in west Japan. These LCD and components clusters do not appear to have been affected.
Toppan and DNP have color filter factories in Niigata and Saitama prefectures, respectively, which are in the area affected by the earthquake. While the condition of these plants is not yet clear, the color filter lines are older Gen 3-3.5. The impact to the supply chain is likely to be insignificant, even if these plants have been damaged. Panasonic LCD’s Gen 6 fab is located in Chiba, close to the earthquake, but it does not appear that there has been any major damage or halt in production.
Hitachi Chemical and Sony Chemical are leading suppliers of Anisotropic Conductive Film (ACF), used for driver IC bonding with glass cells. Hitachi’s ACF factory is located in the Ibaraki prefecture, which is in the earthquake damage zone. There have been reports of damage at Sony factories as well. The situation is still unclear, but any impact on panel makers’ production is likely to be relatively limited since most panel makers have safety stocks of ACF.
Japan is the leading source of semiconductor and LCD manufacturing equipment. Canon and Nikon are two of the leading suppliers of TFT LCD exposure equipment, and their assembly bases are located in Ibaraki and Miyagi prefectures, respectively. Although the situation is unclear, it can be assumed that factory operations will be influenced to some extent. Delivery of exposure tools might be impacted. Although, given equipment development cycles, this will likely occur in the mid to long term. Nikon is the leading supplier of LTPS equipment. There are many LTPS lines currently under development, and if Nikon is impacted, then this could impact the planned ramp-up of some or all of these new LTPS lines.
Additionally, there are many small equipment parts makers located in Japan, and the earthquake might cause disruptions in the supply of some parts, limiting some equipment availability.
The earthquake was felt in Korea as well. Samsung in Tanjeong and LG Display’s TFT LCD factories detected the earthquake, and some sensitive equipment stopped production for a short time. Apparently, checking and calibration processes are under way.
General problems with power and transportation are likely to cause other delays in production, but it is difficult to determine which parts or companies will be affected. Since Japan is the leading source of LCD components and raw materials, makers in Taiwan, Korea, and China have expressed concerns about the supply chain for the next few months.
DisplaySearch was already expecting Japanese TV sales to fall dramatically, based on the strength of Q4’10 and 2010 overall, as well as the end of the Eco-point incentives from the government. Outside of Japan, we recently observed a build-up of inventories. These conditions indicate that some slack already existed in the system before the earthquake.
The earthquake has brought suffering and destruction to Japan, and concern throughout the world. But as for the TFT LCD industry, there does not appear to be any major impact or damage to the overall supply chain. However, the uncertainly and insecurity resulting from this disaster might undermine consumer and business confidence. Along with concern about oil prices, the earthquake in Japan might further psychologically influence consumers and businesses, though in a subtle manner. In summary, we think that the impact of the earthquake on the TFT LCD industry could be more damaging psychologically than physically in terms of the FPD industry.