February 27, 2021

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Texas winter storm blackouts hit chip production

3 min read

The Arctic weather sweeping through Texas is threatening to exacerbate a global shortage in semiconductors, after several manufacturing plants near Austin were forced to shut down.

Austin’s local energy provider has asked all large-scale manufacturers to reduce or shutter operations during the storm in order to give priority to residential and healthcare customers. The area around the state capital is home to several high-tech manufacturers, lured by a combination of local talent and low Texas taxes.

One of the region’s largest semiconductor producers, Samsung Electronics, said it had halted operations at its multibillion-dollar fabrication plant in Austin on Tuesday, with no clear timeline for resuming production.

NXP and Infineon, two key suppliers to the automotive industry, confirmed they too had shut down their Austin plants.

The closures come as carmakers have already been forced to curtail production due to component shortages around the world.

“No doubt this will have an impact on an already big shortage of chips,” said Ben Bajarin, analyst at Creative Strategies.

The past week’s historic storm has claimed at least 23 lives across the southern US and left millions without power. The Texas grid was hit particularly hard, both by the extra demand in the face of record-breaking cold and reduced supply as some power plants went offline.

As the freezing temperatures continued, Austin’s mayor Steve Adler on Tuesday told residents of the Texas capital to use torches and candles even if they had power. In the face of widespread blackouts, Austin Energy told some industrial users in the area to suspend production.

Samsung confirmed the shutdown at its processor chip foundry. The South Korean electronics group had been in discussions about expanding its manufacturing in Texas with a new $17bn plant.

“Due to the recent blackouts in Texas, Samsung Austin Semiconductor gradually halted its operations around 1pm on February 16, as ordered by Austin Energy,” Samsung said. “With prior notice, appropriate measures have been taken for the facilities and wafers in production. While production will resume as soon as power supplies are restored, we are currently discussing the timing with the authorities.”

Shutting down semiconductor manufacturing even for a short time can incur multimillion-dollar losses due to the scale and complexity of the operations.

While chip manufacturing in the US is on a far smaller scale than the largest plants in Taiwan and South Korea, the timing of this week’s shutdowns could not be worse for the industry, which has already been struggling to increase supply to meet resurgent demand. The chip shortage has slowed automotive production around the world and threatens to delay output for other forms of electronics, including smartphones.

Manufacturers in Austin were given only a few hours’ notice before the power was cut to their high-precision production lines, which normally run 24 hours a day, 7 days a week.

Infineon, which acquired a facility in Austin as part of its purchase of Cypress Semiconductor last year, said the advance warning was just enough to be “able to put the factory into a safe state and protect our production inventory”.

“For our critical safety systems, we have been using emergency generators,” a spokesperson said. “We should have a better idea [of the impact] in the next 24-48 hours.”

Analysts at Citi said in a note to clients on Wednesday morning that a “continued power outage from a prolonged freeze would impact [Infineon’s] output of memory chips and potentially exacerbate the wider constrained situation” in automotive semiconductors.

NXP, which has two plants in Austin, said it was warning customers of the “potential for supply disruptions”.

“We are carefully monitoring the situation and will resume operations in our Austin facilities as soon as possible,” said David Reed, executive vice-president of operations at NXP.

Applied Materials, Qorvo, Flex and Texas Instruments are among the other companies with manufacturing across the state.





2021-02-17 12:08:13

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