Renesas says normal production at fire-hit chip plant to take 100-120 days

FILE PHOTO: Renesas Electronics Corp’s logo is seen at a company conference in Tokyo, Japan, April 11, 2017. REUTERS/Toru Hanai

By Eimi Yamamitsu

TOKYO (Reuters) -Japanese chipmaker Renesas Electronics said on Tuesday it would take at least 100 days to get back to normal production at its fire-hit plant, even as the government urged some Taiwanese companies to help with alternative chip production.

The company’s chip factory in northeast Japan was hit by fire on March 19 due to a power surge in one of the machines, putting more pressure on the broader chips industry amid a global shortage of semiconductors that is hurting the production of cars, smartphones and home appliances.

Renesas, which commands nearly a third of the global market share for microcontroller chips used in cars, said 23 machines were damaged in the fire and needed to be replaced or fixed, nearly double its initial estimate of 11.

Renesas’ Chief Executive Officer Hidetoshi Shibata told a news conference that while production at the plant looked likely to resume within a month, recovery to pre-fire levels was expected to take around 100 to 120 days from the incident.

“I’m not too pessimistic about the situation,” he said. “I think we won’t be too far off from the recovery timing...which is within one month. And our outlook is that the manufacturing capacity will recover as close as 100%.”

He added that while any short-term shipment of alternative chip production was impossible, the company has been getting support from outsourcing companies. The company would recuperate losses in the six months ending December through alternative production, both in-house and via outsourcing, Shibata said.

He also said Renesas would take a related sales hit of between 19.5 billion yen and 26 billion yen ($177.4 million to $236.5 million).

Car manufacturers around the world including Toyota, Hyundai, GM and Ford have been assessing the impact on their production, as two-thirds of output at the affected line of the fire-hit plant are automotive chips.

Chip supplies to car makers would stop around the end of April and Renesas expects these companies to feel the impact for a month-and-a-half to two months, Shibata said.

Renesas shares closed down 0.5% on Tuesday, mostly in line with the broader Japanese market.

Earlier in the day, Japan’s industry minister Hiroshi Kajiyama said Japan has asked some Taiwanese manufacturers to cooperate in alternative production of semiconductors.

“We are in communication with several manufacturing equipment makers (in Taiwan) to speed up procurement,” Kajiyama told reporters after a cabinet meeting. “The ministry will also work together for a swift recovery by using all possible means.”

The Japanese government has called on equipment makers to help Renesas restore its production, with bureaucrats contacting companies at home and overseas to request they provide parts and machinery to the fire-hit company, a trade ministry official told Reuters on Wednesday.

($1 = 109.9500 yen)

(Reporting by Eimi Yamamitsu; Additonal reporting by Ritsuko Ando; Editing by Muralikumar Anantharaman and Jacqueline Wong)