Texas Winter Storm Strikes Chip Makers, Compounding Supply Woes
18 February 2021 - 6:33AM
Dow Jones News
By Asa Fitch
Severe weather conditions hitting much of the U.S. have caused
some semiconductor companies to idle production capacity,
threatening to exacerbate a chip shortage that has already prompted
car makers to curtail output at some plants.
South Korea's Samsung Electronics Co., one of the world's
biggest chip makers, operates two factories in Austin, Texas, and
was asked by local authorities to shut those down on Tuesday, said
a company spokeswoman. Samsung was waiting for electricity provider
Austin Energy to advise when the chip maker's operations could
start up again, the spokeswoman said.
Texas has suffered widespread power disruptions that began early
Monday amid a severe winter storm. The outages have prompted local
officials to ask companies to curtail operations to minimize demand
on the region's power grid.
The Austin facilities represent about 28% of Samsung's overall
production capacity, according to Citi analysts. Austin is a
manufacturing hub for Samsung, which is considering a $17 billion
plan to expand its operations there or in other parts of the
U.S.
Dutch chip company NXP Semiconductors NV said Wednesday that it
had to scale back work at two facilities in Austin. "Affected
customers are being notified directly by NXP of the potential for
supply disruptions," the company said.
NXP makes chips for the automotive industry. Automotive sales
comprised $1.19 billion of the company's fourth-quarter revenue,
roughly half of the overall figure.
"Once necessary utility services are restored, our operations
team will be able to evaluate the impact of the shutdown, and when
full production will resume," said NXP's vice president of
operations, David Reed.
NXP's Austin facilities represented about 30% of the company's
total factory square footage as of 2019, according to a regulatory
filing.
Other large customers of Austin Energy have also shut down
because of the storm, according to a statement from a consortium of
those customers. Germany-based Infineon Technologies AG, a car-chip
supplier, has manufacturing facilities there that Citi analysts say
mainly produce memory chips critical for automotive and industrial
markets that accounted for about 5% of the company's revenue last
year. The company didn't immediately return a request for
comment.
The disruptions come at a particularly critical time for the
chip industry, which has experienced surging demand with little
spare production capacity as individuals and businesses adapt to
working from home during the coronavirus pandemic. Sales of
laptops, videogames and data-center servers are up.
The car industry has been hit hard by the supply issues after
some parts makers failed to secure sufficient chips to feed
fast-growing demand. Volkswagen AG, General Motors Co., Ford Motor
Co. and others responded by reducing vehicle production.
Even before the winter weather struck, leading to the power
outages in Texas and elsewhere, the chips shortage had dented
growth ambitions. The shortage was projected to cause the global
auto industry to produce nearly 700,000 fewer cars than planned for
the first three months of 2021, according to research group IHS
Markit Ltd.
Analysts at Raymond James said in a note that the Samsung
shutdown would likely worsen already tight chip-supply conditions.
The Austin facilities comprise largely older chip-manufacturing
technologies and thus aren't likely to have a significant impact on
customers such as mobile-phone-chip designer Qualcomm Inc. or
graphics-chip maker Nvidia Corp., Raymond James said.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
February 17, 2021 14:18 ET (19:18 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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