Fire at chip manufacturing unit in Japan could have 'massive impact' on global auto production

Major Japanese chipmaker Renesas Electronics Corp said on Sunday that partial suspension of operations at its Naka plant due to a recent fire could have a "massive impact" on its ability to supply chips to customers, including automakers.

Renesas President and CEO Hidetoshi Shibata said in an online press conference that the company hopes to resume operation at the affected plant within a month and are also considering increasing production at other plants in an effort to make up for lost the output.

The company said that the fire was caused by a plating tank that caught fire as a result of electrical failure. It destroyed 11 manufacturing units, or nearly 2 per cent of the manufacturing equipment at the plant. A production line that produces the latest 300 mm wafers was damaged as a result of the incident. About two-thirds of the chips produced at the factory are for the auto industry, the company said.

The blaze also contaminated environmentally-controlled "clean rooms" where even small dust particles can damage wafers during the fabrication process.

It took fire-fighters about five hours to bring the fire under control.

Renesas controls around a 20 per cent of global share in microcontrollers used in cars.

The incident comes at a time when carmakers are already struggling with a global chip shortage, caused by a pandemic-driven boom in consumer electronics and an unexpected strong demand in auto sales.

Last month, freezing weather forced many chipmakers to close their plants in Texas.

An ongoing drought in Taiwan is also threatening production there.

Many carmakers including Nissan, Ford and Honda have slowed or temporarily halted production at some of their plants due to chip shortage.

"We are gathering information and trying to see if this will affect us or not," a Honda spokesman said. Other carmakers including Nissan and Toyota also said that they were assessing the situation.

"I think things will get stable by the fall but certainly it's going to be complicated," Scott Keogh, VW's North America chief executive told the BBC.

"Its going to be challenging but I think we'll navigate it."

In May last year, AMD CEO Lisa Su informed its customers that the company was taking all necessary steps to mitigate the impact of coronavirus outbreak on the AMD's global operations and to maintain uninterrupted supply of processors.

Intel also said that it was working closely with suppliers to identify "short-term burst shipping capacity" and sharing collective resources, planes and trucks to offer the best solution for customers.

Earlier this month, Taiwan assured that it had enough water reserves to keep local chip makers running till late May 2021, amid a drought that could worsen a chip supply shortage for the global auto industry.

Taiwan's Minister of Economic Affairs, Wang Mei-hua, told reporters that the drought had not yet impacted TSMC (Taiwan Semiconductor Manufacturing Company) - the world's largest contract chipmaker - or others semiconductor manufacturers in the country, and that there was enough water supply to keep semiconductor manufacturing facilities humming until May.