Toshiba NAND chip plant halted by power outage

By @ibtimes on

Production at one of Toshiba Corp's key chip factories has been halted by a brief cut in power, the company said, hitting output of NAND flash memory used in tablet computers and smartphones.

Shipments of NAND from the central Japan plant could be cut by up to 20 percent in January and February, even with the factory due to resume normal operations on Friday, a Toshiba spokesman said on Thursday.

That could make NAND memory used in mobile devices more expensive just as manufacturers prepare to launch a slew of tablets to compete with Apple Inc's explosively popular iPad.

There could be an increase in prices. We've heard Apple's demand for flash in 2011 is going be up 100 percent over 2010 so this is a bad time to have a shortage, said Kevin Cassidy, an analyst at Stifel Nicolaus.

Toshiba, the world's No. 2 NAND chipmaker after Samsung, produces all its NAND memory at the Yokkaichi facility and its halt could help rivals like South Korea's Samsung Electronics.

The Toshiba spokesman declined to comment on the extent of the likely effect on chip business operating profits, which the company said in September were on track to hit 100 billion yen ($1.2 billion) for the year to next March.

Shares of Toshiba dropped 1.6 percent to 430 yen while Samsung rose 3.3 percent to 917,000 won.

Some analysts estimate Apple consumes about a third of the global supply of NAND, a commodity product whose price is mostly driven by supply and demand rather than quality.

Cassidy estimated that NAND flash prices rose about 10 percent earlier this month and could climb another 10 percent due to Toshiba's production halt.

Higher NAND costs might even impact prices consumers pay for new smartphones and tablets that Apple's rivals plan to launch next year.

If flash memory pricing goes up short term because of these supply shortages then it's going to make the new tablets being introduced more expensive because all the tablet guys will just pass on that pricing, said Krishna Shankar, an analyst at ThinkEquity.

Chubu Electric Power Co said there had been a fall in voltage in its power supply in the area, but the cause was not immediately clear.

Once things calm down I think there may be talk about compensation, said Yuichi Ishida, an analyst at Mizuho Investors Securities. Toshiba declined to comment on whether it would be seeking compensation.

Japanese refiner Cosmo Oil Co said on Wednesday it had stopped operations at its refinery in Yokkaichi due to the outage. One crude distillation unit will be re-started this weekend and the remaining refining units next week.

(Additional reporting by Noel Randewich in San Francisco; Editing by Richard Chang)

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