Tsunami in Japan disrupts flat-panel display and related supply chains

Santa Clara, CA--In addition to the impacts of the Japanese tsunami on automobile manufacturing and fiber-optic communications disruptions, DisplaySearch analysts reported that in the second week after the Japan earthquake, some additional impacts to the flat-panel display (FPD) and photovoltaic solar-cell supply chain are beginning to emerge. The analysts say that in the near term, some panel makers need to work with new material suppliers to keep their lines running. Longer term, there are some indications that key equipment production may be delayed.

ITO (indium tin oxide) is the main type of transparent conductor, and is widely used in TFT LCDs and touch screens. The raw material for ITO deposition is the ITO target. The leading ITO target makers are JX Nikko, Mitsui, and SCP, followed by ULVAC and Heesung Metal. The two Japanese firms have more than a 70% share of the market. JX Nikko’s factory is located 80 Km from the Fukushima nuclear power plant, and is currently shut down. Mitsui has not been impacted by the earthquake. Panel makers generally have a month of ITO target inventory on hand, so depending on the supplier, some panel makers could begin to experience constraints.

NF3 (nitrogen trifluoride) gas is used in cleaning CVD (Chemical Vapor Deposition) chambers in the production of thin-film transistor liquid-crystal displays (TFT LCDs), semiconductors, and amorphous silicon thin-film solar cells. The supply of NF3 was tight before the earthquake, as low prices had discouraged gas makers from expanding capacity. At the same time, growth in the display market as well as amorphous silicon-based thin film solar cell production had increased demand. While several companies supply NF3 gas, most of the supply is from OCI Materials, Air Products, and two Japanese companies: Kanto Denka Kogyo, and Mitsui Chemicals. The two Japanese companies, along with others like Central Gas, account for approximately 30% of world NF3 supply. Kanto Denka Kogyo has a plant in Shibukawa, in northeast Japan, which has been impacted by the earthquake and unstable electricity, potentially causing disruptions to NF3 production. Reports from some panel makers indicate that the supply of NF3 is tight due to the earthquake and the unstable electric power supply in Japan.

Pigments are used in color filters. DIC, a Japanese supplier of organic pigments, has indicated that its production has been impacted, which could have an effect on the supply of green pigments for color filters.

Connectors used for the power and graphics signals in LCD modules made by Hirose and JAE may be in short supply due to the earthquake. In most of these cases, panel makers are holding at least a few weeks of inventory, giving them some time to locate alternative sources. However, one area that does not allow stockpiling is manufacturing equipment, needed to expand existing capacity or build new fabs.

Exposure equipment for Gen 4 and smaller fabs is typically the step-and-repeat type (steppers), which is dominated by Nikon. The company makes steppers in its Miyagi facility, which was damaged. A statement on the company website announced that the facility is closed with no indication of when it will resume operations. Nikon was at full production capacity before the disaster and had a great deal of work in process. Thus, it seems highly likely that shipments for AMOLED and LTPS LCD fabs will be delayed. If so, the current tight supply would continue longer than initially forecast. Gen 5 and larger fabs use projection lens scanning exposure equipment, which may also experience some delays as there are numerous sub-assemblies that must be produced and put together to make the complete machine.

SOURCE: DisplaySearch; www.displaysearchblog.com/2011/03/emerging-disruptions-to-the-fpd-supply-chain/