Japanese Earthquake Disaster Strengthens Global MEMS Industry
Mar 16, 2012
For the microelectromechanical systems (MEMS) market, the Japanese earthquake served as a Darwinian event, yielding a supply chain that is now much richer, more diverse and better suited for future growth, according to the IHS iSuppli MEMS & Sensors Service at information and analytics provider IHS (NYSE: IHS).
"Although the majority of MEMS operations in Japan were unscathed by the disaster of March 11, 2011, the earthquake had a major impact on the global business," noted Richard Dixon, principal analyst for MEMS & sensors at IHS. "Hoping to avoid supply disruptions, some MEMS buyers during the past year have moved to diversify their supplier bases - and reduce reliance on sole sources based in Japan. This mitigates the risk to supply - and opens opportunities for a broader set of suppliers worldwide, strengthening the global MEMS supply chain as a whole."
Although Japan accounted for about 33 percent of the global MEMS sensor market revenue at the time of the earthquake last year, only five MEMS-related factories were directly affected in the northeast section of the country. These facilities were Freescale Semiconductor's accelerometer facility in Sendai; Canon's MEMS printhead fab in Fukushima; Texas Instruments' DLP wafer site in Miho; Seiko Epson's printhead, gyroscope and microphone fab in Sakata; and Micronics Japan Corp.'s MEMS wafer probe operations.
These suppliers serve the automotive sector and the consumer electronics market.
Microphones, a Year Later
Prior to the quake, supplies of key MEMS had been dangerously dependent on a small pool of sources in Japan.
A case in point is Knowles Acoustics, a maker of tiny microphones and speakers.
Knowles has been pioneering the MEMS microphone market for a number of years, but employs just a single supplier for the MEMS devices used in its products. This was risky, as last year the company shipped 41 percent of all microphones - MEMS or otherwise - for cellphones, and was dependent on only one fab in Japan. That was foundry partner Sony Kyushu, responsible for the production of MEMS microphone wafers needed by Knowles.
Luckily, this fab was located on Japan's southern island of Kyushu, far from the epicenter of the earthquake. No other MEMS manufacturer would have been able to deliver the very high volumes of MEMS microphones at the time.
In light of the crisis, Knowles is now looking to diversify its MEMS supply base and add an additional source, according to IHS iSuppli information.
With two sources, more cellphone original equipment manufacturers (OEM) are likely to be willing to adopt Knowles' technology in their products.
Made in Japan: 97 Percent of the World's Digital Compasses
Around the time of the disaster, Japanese-based companies were making an incredible 97 percent of the world's electronic compasses, devices that are now being rapidly adopted in handsets and tablets from around the globe.
The figure below presents the locations of major MEMS and digital compass fabs in Japan.
Well over $400 million worth of such devices shipped during 2011, mostly from just four Japanese companies: AKM, Yamaha, Aichi Steel and ALPS. This level of production would not have been possible if any of the company's plants had been located in the northeast of the country, which was the region affected by the quake.
Three of the four plants are located furthest south on the island of Kyushu, including AKM, the largest supplier with 70 percent market share last year. AKM has a general policy of mitigating risk by employing multiple suppliers.
Japan's Automotive Industry Beset by Double Blow
A significant portion of the world's automotive MEMS sensors market, an estimated 24 percent in 2011, is tied up in Japanese companies. The biggest suppliers in this area are Denso and Panasonic.
Denso makes airbag accelerometers, gyroscopes and pressure sensors that are used for engine management. Panasonic makes gyroscopes for vehicle stability and GPS navigation.
Smaller players include Murata, which offers gyroscopes for GPS navigation systems; Kyocera, which makes tire pressure monitors; and Mitsubishi Electric, which sells airbag accelerometers. Other smaller players include Fuji Electric, which offers manifold pressure sensors; and Nicera, which produces thermopiles to detect temperature in the interior.
OEMs like Toyota, Honda and Nissan did an amazing job of damage containment by finding new sources and mitigating the disruptions caused by the earthquake or associated infrastructure-related events like blackouts.
Unfortunately, Japanese automotive OEMs were also hit by the Thailand floods in November 2011, impacting much of the resourcing work up to that point.
Suppliers to these Japanese OEMs have had a tough time. Denso, a major supplier of accelerometers and pressure sensors to Honda and Toyota, showed a second-quarter 2011 shortfall of $850 million, although it managed to completely recover in the subsequent quarter. The effects trickled down to Micronas, a major supplier of Hall sensors to Denso.
Learn More > IHS iSuppli MEMS & Sensors Service