Event: on the evening of March 16, the Japan Meteorological Agency reported that a magnitude 7.3 earthquake occurred in the sea area near Fukushima Prefecture, Japan, and the earthquake was felt strongly in the capital Tokyo.
Last year, Fukushima was a gathering place for a number of semiconductor related enterprises. According to the news released on the website of Japan Meteorological Agency, a magnitude 7.3 earthquake occurred in the sea area near Fukushima, Japan at 23:07 local time on February 13, 2021. Affected by the earthquake, some sections of Japan’s northeast, Shangyue, Beilu and Hokkaido Shinkansen were temporarily suspended due to power failure. The pipeline of JR station in Fukushima City, Fukushima Prefecture was damaged and leaked a lot. The direct or indirect impact of the incident on the semiconductor industry chain is as follows: 1) Renesas electronics has a main factory in Ibaraki Prefecture adjacent to Fukushima Prefecture, which suffered a power outage due to the earthquake. After the power supply was restored, Renesas electronics suspended the production line of the factory in order to confirm whether the production equipment and chip products in the dust-free workshop were intact, even if the buildings in the factory were not damaged; 2) The earthquake intensity of the factories of shinyue and sumco, a large silicon wafer manufacturer in Japan, within the radiation range of the earthquake still exceeds magnitude 4, so they have also been shut down for inspection according to the standard process; 3) Mitsui chemical also suspended the operation of a factory in Chiba county. According to the company’s spokesman, it will take 10-14 days to fully resume production. In addition to the chemicals needed to produce semiconductors, the factory mainly produces reagents for the manufacture of auto parts.
Silicon wafer photoresist is the world’s first tier supplier, and the supply interruption of Xinyue leads to the thinking of supply chain security. Xinyue chemical includes six business divisions, among which semiconductor silicon materials business, electronic functional materials business (packaging materials, photomask, etc.), silicone business, special chemicals business (metal silicon, polyvinyl alcohol, etc.) are closely related to the electronic industry. As a supplier of high-tech materials, Xinyue chemical is second to none in the supply of raw materials such as semiconductor silicon and polyvinyl chloride. The market share of semiconductor silicon wafer ranks first in the world all year round, and its photoresist products are also in the first echelon in the world. In fiscal year 2020, the revenue of semiconductor silicon wafer business of Xinyue chemical accounted for 25%, and the revenue of PVC and chemical products, silicone, electronic functional materials and functional chemicals accounted for 31%, 14%, 16% and 7.5%. The company has realized the vertical extension of the industrial chain in 2020, and the self-produced metal silicon can provide raw materials for semiconductor silicon wafers. In terms of silicon wafers: according to semi data, the competition pattern of the world’s top five semiconductor silicon wafer manufacturers in 2020 is that Japan Xinyue chemical accounts for 27.53%; Sumco in Japan accounted for 21.51%; China’s Taiwan region accounted for 14.8% of the world’s wafer. Germany’s Shichuang electronic materials and South Korea’s sksilon accounted for 11.46% and 11.31% respectively, of which the total market share of the two companies in Japan exceeded 45%. Photoresist: according to jiwei.com, after the magnitude 7.3 earthquake in Fukushima, Japan, in February 2021, Xinyue chemical’s KrF photoresist production and overseas supply were blocked. At that time, downstream agents considered cooperating with transportation and related costs, and raised the quotation of the new contract. In mid 2021, due to the limited capacity of KrF photoresist and the global expansion of wafers, Japan’s Xinyue chemical has limited the supply of KrF photoresist to many Chinese mainland wafer fabs, and even has already informed some small and medium Fab factories to stop supplying KrF photoresist. The incident triggered many wafer factories in China to think about the safety of semiconductor material supply chain, and further accelerated the localization and introduction process of material end.
Investment suggestion: we believe that this event is expected to arouse the industry’s thinking on supply chain security again, focusing on Chinese enterprises with layout or orders in downstream wafer factories, leading enterprises of photoresist Red Avenue New Materials Group Co.Ltd(603650) , platform enterprises of semiconductor materials Jiangsu Yoke Technology Co.Ltd(002409) , electronic special gas faucet Guangdong Huate Gas Co.Ltd(688268) , CMP polishing solution faucet Anji Microelectronics Technology (Shanghai) Co.Ltd(688019) , CMP polishing pad leader Hubei Dinglong Co.Ltd(300054) , etc.
Risk warning: supply chain transportation risk; Product price fluctuation risk; Downstream demand was lower than expected.
