iSuppli issues update on Katrina-related supply disruption

It remains too early to gauge the full effect of the shutdown of a New Orleans facility that produces a key chemical used in epitaxial-film deposition on silicon substrates. However, manufacturers using epitaxial substrates for producing chips already are moving to mitigate the effect of the closure, according to iSuppli Corp.

Hurricane Katrina caused the outage at the New Orleans facility, which is owned by Air Products & Chemicals Inc. The facility produces hydrogen used in the manufacturing of epitaxial films deposited on silicon substrates. These films mainly are used for the manufacturing of discrete, higher-voltage semiconductors employed in power-management applications.

Constrained supply of this type of hydrogen may have an impact on production of semiconductors, iSuppli noted last week.

Air Products said parts of its New Orleans facility should return to operation during the coming months. The company said most of the water has been pumped out of the facility, road access has been restored and initial repairs have begun. However, the company warned it still won't be able to fulfill all of its contract requirements because its hydrogen supply capabilities will be disrupted for several months.

iSuppli estimates that the Air Products facility in New Orleans produces roughly 30 to 35 percent of the high-grade Hydrogen used by North America's semiconductor industry. However, companies that use epitaxial wafers have sufficient supply to cover the shortfall in the near term, according to Len Jelinek, director and principal analyst, semiconductor manufacturing for iSuppli.

"Since manufacturers typically have one-month's worth of supplies on hand, including hydrogen, it is highly unlikely that there will be a short-term effect on worldwide semiconductor production," Jelinek said. "There may be some spot shortages and lead-time extensions in the fourth quarter, but those probably will be resolved by the end of the first quarter of 2006."