COVID-19 Collateral Chip Collision – Will Fabs & Foundries Flounder?

Corona Fab Impact –
lower production/raise prices
Chip production supply chain may break
It could temporarily fix memory oversupply
Could it risk the fall roll out of next Iphone

The ” Two week tango” – Waiting games at fabs
When a highly specialized piece of semiconductor equipment misbehaves to the point where fab workers can’t fix it, they pick up the phone and call their friendly tool maker field service techs who show up relatively quickly and fix the issue with on site or nearby spare parts and get the tool back up very quickly.

That is until Corona……

We have heard that at least TSMC and Intel fabs have instituted a two week quarantine period for outside service people.

Which means a tech shows up to fix or install a tool and has to cool his or her heels in a local hotel for two weeks until they prove they are not infected.

What happens to the tool for those two weeks? It stays down or not installed….

When you have dozens of Dep or Etch tools, losing a few may slow things down but lose a litho tool, especially a highly complex, prone to problems, in need of lots of preventative maintenance EUV tool and it will ruin a fab managers day and month for sure.

As you can imagine in a fab with literally hundreds of tools, this could and will easily “snowball” into a major league problem.

Yields will fall, throughput will suffer, lots of wafers will wind up in the trash.

If we take the cost of a $7B fab and try to calculate the hourly operating cost….its a lot….The lost productivity will be a big number.

Installs will suffer as well
Aside from impacting ongoing production, the Corona related delays and problems also obviously impact new tool installs, perhaps even more so than ongoing operations.

If the tool maker has to send a team to help install a new tool and the team has to cool its heels at TSMC for two weeks , it means that those same experts can’t be at another fab on time to install another tool for the next customer and installs go to hell in a hurry.

Basically the amount of time spent waiting around in hotels and not installing or fixing tools will be a very significant productivity loss.

Its also not like you can hire a warm body off the street and have them install and EUV scanner the next day.  You can’t ramp up the number of service people over night.

If you think this is a good reason for remote diagnostics….think again.  There is no such thing as a semiconductor tool hooked up to the internet at TSMC.  No data connection whatsoever is allowed to the outside world lest it get hacked and secret recipes stolen or machines hijacked. The tools are in isolation with only highly supervised, hands on visits allowed

Could it push out Apples Iphone launch?
TSMC and Apple have developed a very predictable working rhythm to get Iphones launched every fall like clockwork.

TSMC orders new semiconductor tools for the next generation of Apple processors roughly Q4 of the prior year, they get installed in Q1, initial production starts in Q2 with full production in Q3 for the September or October launch in time for holiday sales.

We are currently in whats is likely peak new tool installation time at TSMC for the next gen semiconductor process.

If enough new tools installations get delayed, it could very easily push the whole schedule back.

Slow down the install of a few EUV tools today and suddenly you don’t have enough tools to do enough layers in high enough volume to make enough chips to go into enough Iphones for the fall launch dates.

The domino effect could be quite large….

AMD and Intel not immune either
You might think that Intel and AMD are not as impacted but AMD gets its parts from TSMC and Intel has the same Corona protocol as TSMC.  Intel has already been short of production and has also farmed out to TSMC.

Supply chain has lots of single points of failure
It usually never comes to light, but the semiconductor industry has a lot of single points of failure in its highly complex supply chain.

It was pointed out in painful detail how the trade spat between Korea and Japan got ugly quickly as Japan had a monopoly as one of those single points of failure in the supply chain of photoresist and certain chemicals.

If those sole suppliers are in the wrong place and the wrong time due to Corona it will ripple through the industry.

Though there are many chemicals and materials one such chemical is TMAH (TETRAMETHYLAMMONIUM HYDROXIDE ) used in silicon etch and other applications.  A nasty substance supplied mainly by China….home to Corona.

Maybe Corona will hit memory fabs
Maybe the semiconductor industry will get lucky and the oversupply of memory chips will get fixed by the Corona slow down hitting a few memory fabs and take them off line, putting supply and demand back in balance…… Idaho may luckily be the last place Corona will show up at.  Memory prices may get a boost…..

The stocks
We should start to see some pre-announcements of missing numbers over the next few weeks as the electronics food chain grinds slower and slower.  Though things will obviously recover, it make take a while for the supply chain to recover and in some cases the time will never be recovered .

The damage may be contained within the calendar year for some but maybe not all.  Those further down the food chain, the users of chips, such as Apple will likely see the most impact as they have the widest exposure to many, many parts and suppliers. Fabs and other complex manufacturers clearly will have issues.

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