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Chip fab shutdowns rock whole industry

Lisa Napoli Aug 3, 2007

Chip fab shutdowns rock whole industry

Lisa Napoli Aug 3, 2007


Bob Moon: We are experiencing technical difficulties and they could have serious effects, come the holiday shopping season.

Take Two Interactive just put the brakes on a highly anticipated video-game sequel. The latest installment of Grand Theft Auto won’t hit shelves until spring. It had been due this October, and the delay threatens to be a drag on holiday sales for the whole video-game business.

Then, there are the chips that run some of those games, and music players and a lot of other things. As Lisa Napoli reports, a power outage on the other side of the world could cause a pricing jolt for all of us.

Lisa Napoli: Anyone who makes digital cameras, cell phones, MP3 players and the like is keeping a close eye on a production shutdown near Seoul today. A power outage halted chip-making at six of Samsung’s 16 semi-conductor plants, where flash memory cards are made.

Those cards are as essential to many electronic devices as water is to humans. The shutdown comes just when the industry was starting to recover from a lag in supply:

Nam Kim: The timing is pretty bad.

That’s analyst Nam Kim of research firm iSuppli. He says Samsung alone makes well over 40 percent of the world’s supply of this kind of flash memory.

Now, the plants are supposed to get back up and running over the weekend. But some industry-watchers say even a few days offline could wipe out a month’s supply of this coveted memory.

Turns out that making these chips is kind of like making a souffle: one slip-up in production along the way, and the whole batch can be toast.

John Greenagle: If you lose power in one of these really critical steps, it can do irreparable damage to the wafer that’s in process.

John Greenagle is with the Semiconductor Industry Association. He says a major disruption in supply could cause prices for memory to swell in the short-term.

That would be a change for the semi-conductor industry. Even though more products than ever use flash memory cards, an industry report out today shows prices have generally been on the wane.

In Los Angeles, I’m Lisa Napoli for Marketplace.

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