Thai flood update: On Semi closing, STATS ChipPAC delayed, iSuppli’s PC downgrade

Update December 28, 2011 – Ahead of schedule, Rohm Co., Ltd., will resume full-scale production of all products affected by the flooding in Thailand on January 1, 2012.

Rohm makes ICs, transistors, diodes, resistors, and tantalum capacitors at LAPIS Semiconductor (Ayutthaya) Co., Ltd., in Rojana Industrial Park in Ayutthaya (closed due to the floods on October 8), and ROHM Integrated Systems (Thailand) Co. Ltd. in Navanakom Industrial Park in Pathumthani (floods closed it on October 15).

Read the details of Rohm’s Thailand recovery here.

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December 9, 2011 - More news this week from companies reassessing their plans following the devastating Thailand flooding. And one analyst puts a number to the total disaster’s industrywide impact: 3.8 million fewer PC units in the pipeline for 1Q11.

After initial suspending its local probe/assembly/test facilities sites in Ayutthaya’s Rojana Industrial Park, On Semiconductor now says analysis of the damage (and "prolonged inability of these sites to operate") means the cost to recover, rebuild, and restart those operations "is not financially viable [...] for an indefinite period, if at all." So it is ceasing all production at its Sanyo Semiconductor sites in Ayutthaya, Thailand, and will keep limited production at the Bang Pa In facility, a decision that affects some 1600 employees. Most of the Thai output will be transferred to other internal sites in Malaysia, Philippines, and China plus some external subcons — a process helped by the company’s recovery of "certain key assets" from the affected sites "which will be crucial to reestablishing the supply line to these customers." Given the complexity of complex production transfers, a return to pre-flood production capacity is expected to "take multiple quarters."

In October On Semiconductor suspended indefinitely its local operations, formerly owned by Sanyo Semiconductor and acquired earlier this year. Damage to the Rojana sites, which produced ~10%-12% of the company’s total global output (by revenues), were thought to exceed the $50M of potential insurance proceeds. The Bang Pa In facility was later affected by the flooding as well.

Another firm affected by the Thailand flooding damage, STATS ChipPAC, says its operation in the Navanakorn Industrial Estate which has been offline since Oct. 17 will remain offline through January, and will resume "partial" operations sometime later in 1Q12. Originally the company had projected the plant would be suspended only to the beginning of December.

Flood water levels at the site have receded to where the company has regained access to the facility to begin assessing damage, including potential recovery of assets (with help from outside "equipment restoration specialists") and restoration planning. Production also has been shifted to other sites.

Despite the delay, the company is reaffirming its 4Q11 lowered expectations (from late-Oct.’s 3Q11 financial statements), saying 4Q11 sales will increase only single-digit growth sequentially (the Thai flooding taking an estimated -7% hit to revenues), with adjusted EBITDA of 20%-25% of sales and $50M-$60M in capex.

We’ve been tracking the Thailand flooding’s impact on our sector; here’s a list of test/assembly firms who’ve been affected. With many hard-disk drive suppliers concentrated in Thailand, the domino effect is expected to ripple up and down the supply chain — taking form as softer demand for components like DRAM (as if that sector needed more sluggishness), and ultimately PC supplies. IHS iSuppli calculates nearly a 4M unit shortfall in 1Q11 PC shipments as a result, exacerbating what is already a seasonally slow post-holiday period for PC demand. HDD supplies should rebound by 2Q12, though — and might even achieve oversupply before the year’s out.

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