Reported by New Intelligence
Source: Bloomberg
Editor: yaxin
[New Intelligence Overview] Amid a global chip supply crunch, Renesas Electronics, the third largest automotive chip manufacturer, has suspended production for a month due to a fire. Currently, Toyota is Renesas’ largest customer and is assessing the impact of the factory fire.
As if the roof was leaking, a fire broke out, exacerbating the global automotive chip shortage. Last Friday, a fire occurred at Renesas Electronics’ 12-inch chip factory in Japan. Although the fire was quickly extinguished, Renesas has decided to temporarily halt production on the 12-inch production line. Renesas CEO Hidetoshi Shibata stated at a press conference on Sunday, “The recent fire at our semiconductor factory will have a significant impact on the supply of chips to the automotive industry.”
Was the fire caused by excessive current?
The factory where the fire occurred is Renesas’ Naka plant in the Tsukuba area of Ibaraki Prefecture. The fire broke out at 2:47 AM on Friday and took over five hours to bring under control. According to reports, Renesas has six semiconductor factories in Japan, and the one that caught fire is a key facility for producing automotive semiconductors and is also a major 300mm wafer production plant. 
Local fire officials initially believe that the cause of the fire was an electroplating device on the first floor of the N3 building catching fire due to excessive current. Because the device’s casing and the electroplating tank have relatively low heat resistance, excessive current can lead to a fire. The fire damaged 11 chip manufacturing machines and approximately 5% (600 square meters) of the cleanroom on the first floor of the building. The company stated that it is still working to determine the extent of the damage to the cleanroom caused by the fire. The cleanroom is designed to prevent contamination of semiconductors, so damage from the fire could severely impact production. 
Renesas ranks among the top ten semiconductor suppliers globally, with its chips used in mobile communications, automotive electronics, and other fields. Shibata stated, “The background of this fire is that we no longer have surplus semiconductor capacity.” 
It is reported that if the semiconductor production process is mixed with dust and other contaminants in the air, there is a possibility of failure. Therefore, the final condition of smoke and fumes in the cleanroom will determine the specific time for resuming operations. Renesas plans to restart production at this chip factory in a month, and the month-long shutdown will result in an economic loss of 17 billion yen (approximately 156 million USD).
Natural disasters and human errors, Toyota, the largest customer, will be severely impacted.
Earlier this year, an earthquake in Japan caused Renesas’ Naka plant to halt production for nearly half a month. At that time, the earthquake caused a power outage, but the factory’s generator failed to start, raising further concerns in the industry about the shortage of automotive semiconductor chips. Netizens commented, “Natural disasters and human errors are all present.” 
The factory building where the fire occurred is currently mass-producing advanced products transferred from TSMC. If production continues to be halted, the impact on the supply of automotive semiconductor chips may continue to expand. Renesas is the third largest automotive chip manufacturer globally, and according to Bloomberg’s supply chain analysis, Toyota is one of its largest customers, accounting for 6.6% of Renesas’ revenue, which was 715.7 billion USD last year. Toyota is currently assessing the changes brought about by the fire at Renesas’ factory. 
Due to the semiconductor supply shortage, Toyota’s small car factory in the Czech Republic will halt production for two weeks. Renesas stated that two-thirds of the chip products from the 300mm wafer factory that caught fire are automotive chips.
Automobiles are choked by chip shortages, the global chip price increase is palpable.
After the pandemic, due to strong demand for laptops, tablets, and consumer electronics leading to chip shortages, global automakers have been struggling to keep assembly lines running. The fire at Renesas’ chip factory may exacerbate an already difficult supply situation. In mid to late February, extreme cold weather in Texas caused local water and power outages, leading to the shutdown of two factories of NXP, the largest automotive chip manufacturer in the world. 
The world’s second-largest chip manufacturer, Samsung Electronics, and automotive chip manufacturer Infineon also faced shutdowns at their local production bases. Due to the chip shortage, automakers around the world are shutting down assembly lines. Earlier this year, Ford, Toyota, Fiat Chrysler Automobiles (FCA), and Nissan all stated that they had reduced vehicle production due to a shortage of semiconductor components. 
According to research by independent asset research firm Bernstein Research, the global automotive chip shortage in 2021 is expected to result in a reduction of 2 to 4.5 million vehicles in production. This is equivalent to nearly 5% of the global annual automotive production over the past decade. It is estimated that earlier this year, global automakers faced a sales loss of approximately 61 billion USD in 2021 due to the semiconductor shortage. 
Netizens generally believe that the fire at Renesas’ factory is clearly a “hunger marketing” strategy to raise their chip prices. 
Regardless, Renesas is working with automotive customers and key suppliers to find various ways to mitigate the losses caused by this factory shutdown to the automotive industry.
References:
https://www.bloomberg.com/news/articles/2021-03-21/automotive-chip-supplies-to-be-hurt-by-renesas-fire-ceo-says?srnd=technology-vp
