Chip maker in Japan halts production as China market sags

Chip maker in Japan halts production as China market sags

Renesas has halted semiconductor production at 13 plants as China demand flags. The suspension could last weeks or months as inventory piles up. The company hopes that a dramatic output cut will reduce its rising inventories and allow more efficient production in the future.

As reported by Nikkei Asian review, Renesas Electronics will temporarily halt work at 13 of the company’s 14 production facilities, including all nine domestic plants, due to high inventory levels and possible impact as Chinese demand for automotive and machinery tools plummets.

According to Nikkei, “sluggish iPhone sales in China led to a roughly 30% drop in total net profit at eight key Apple suppliers, including Samsung Electronics, SK Hynix and Qualcomm, for the October-December period from the previous quarter.”

It is rare for a semiconductor maker to close factories for a month or longer, except for annual maintenance and other planned events. The material and process costs of stopping and starting a production line are enormous.

The company will suspend operations at six front-end production sites in Japan for one month starting around the end of April and for another month in August. It also will shut three Japanese back-end facilities for several weeks between April and September. Four overseas plants in China and Malaysia will be closed for several weeks as well.

Renasis is known for microcontrollers, used in things like cars, home appliances and industrial machinery. But chip demand for automotive, air conditioner and machine tool products fell more drastically than expected in China.

The weight of China’s troubles are falling throughout the industry. Also in the balance, an ongoing Sino-U.S. trade war and uncertainties tied to the U.K.’s looming exit from the European Union.

The global semiconductor market grew 14% in 2018 to $468.8 billion, but is expected to expand more modestly this year, according to World Semiconductor Trade Statistics.

Full story here.

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