A Close Call

April 17, 2011

Back in 2006, when Fab 5 was but a twinkle in the eye, Toshiba and SanDisk reportedly were considering locating Fab 5 in the Iwate Prefecture in northeastern Japan.

Toshiba already had production facilities in Kitakami City, so this was likely the site under consideration.

At the end of the day, the decision was made to build Fab 5 in southern Japan, in Yokkaichi, adjacent to the existing fabs.

Good decision.

I shudder to think of the implications, if the decision had gone the other way.

This was a close call.

Kitakami is only 89 miles from devastated city of Sendai and the Fukushima Nuclear Plant. Sendai itself is only 80 miles west from the epicenter of last month’s massive Japanese earthquake.

If Toshiba and SanDisk had decided to build in Kitakami, today’s worries would likely run the gamut from building and equipment damage, through rolling power outages to potential radiation risks.

As it worked out, Toshiba and SanDisk decided to build next to their existing NAND fabs in Yokkaichi, about 500 miles south of Kitakami.

Whew.

We’ll know soon enough how the last quarter went at Yokkaichi.

FWIW I am inclined to believe that SanDisk will emerge relatively unscathed. Next weeks earnings report will likely be pretty much steady as she goes- along the lines of the MS 3 April report:

“Our checks suggest wafer scrap was likely lower or 1/3 of the $18M impact experienced from power outage last year.”

While there could be some issues obtaining raw wafers, my guess is the Yokkaichi fab complex will be able to patch together sufficient supply.

Since Yokkaichi is in southern Japan, power supplies should be OK. There is likely minimal risk of rolling blackouts. Electrical power from the south can’t be sent north because the southern half of Japan uses 100 volt, 60 hertz, while the north uses 100 volt, 50 hertz (cycles per second) electricity.

The two are incompatible.

In the graphic above, Yokkaichi is on the first bay south of Tokyo in the 60 hertz zone.

While no one is talking publicly about Fab 6 yet, one would hope that recent events have shaken up the status quo.

Fab 6

In 2008, Toshiba announced its plan to build Fab 6 in Kitakami City, whether SanDisk was on board or not. Reading between the lines, SanDisk was having second thoughts.

Good thinking.

Fab 6 is coming, on way or another. Fab 5 will likely reach full utilization in 2014/2015.

NAND demand driven by mobile, tablets, laptops and the enterprise will likely be overwhelming. Those such as SanDisk/Toshiba riding this wave with the expertise and IP to lean into the trend, will have to build or be left behind.

Working backwards, I’m guessing we’ll get the Fab 6 announcement round about 2013. Initial planning is likely underway already.

There are lots of angles which could contribute to decision making. The biggest would be progress on 3D R/W, the potential successor to NAND.

All this said, I would hope that Toshiba realizes that Kitakami City is a risk not worth fighting for, as a location for Fab 6.

Might be time to bite the bullet and look outside Japan to Southeast Asia.

China?

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