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TI’s Japan Factory Suffers Damage

DALLAS, Texas — After a preliminary assessment, Texas Instruments (TI) (NYSE: TXN) today said its manufacturing site in Miho, Japan, about 40 miles northwest of Tokyo, suffered substantial damage during last Friday's 8.9 magnitude earthquake.

The company estimates it will reinstate production in stages, beginning with several lines in May and returning the factory to full production in mid-July, which translates to full shipment capability in September. This schedule could be delayed if the region's power grid is unstable or if further complications prevent the re-start of equipment.

TI is moving quickly to shift production to other fabs and so far has identified alternate manufacturing sites for about 60 percent of Miho's wafer production. Work is underway to increase this percentage by moving the production of additional products.

Specific damage at Miho includes the following:

  • The infrastructure systems that deliver chemicals, gases, water and air were damaged, and repairs should be complete in about three weeks.
  • Impact to the manufacturing equipment is unclear until continuous power is available from the electric utility.
  • Work-in-process was damaged, and the current assumption is that about 40 percent of it can be recovered to support customers.
  • The Miho building itself suffered little damage and remains structurally sound. Recovery began in earnest over the weekend, with teams from Miho, Hiji, Dallas and Malaysia on the ground, and additional teams en route.

    The Miho fab produced about 10 percent of TI's output as measured by revenue in 2010, of which more than a third was DLP and the remainder of which was Analog. TI expects to incur previously unexpected expenses in the first and second quarters for cost of recovery. In addition, the company expects some loss of revenue in the first quarter and more lost revenue in the second quarter. Multiple factors will affect revenue loss, including TI's ability to move production to other factories, existing inventory from which to meet customers' needs, the level of demand from customers taking delivery of products in Japan, and the ability to incrementally increase production each month at Miho. TI expects to describe financial impact in detail at the time of its first-quarter earnings report on April 18.

    TI's fab in Aizu-wakamatsu, about 150 miles north of Tokyo, also was damaged in the earthquake, though equipment there already is being re-started and full production is estimated by mid-April, assuming a stable power supply. The company's third fab in Hiji, about 500 miles south of Tokyo, was undamaged and is currently running at normal capacity.

    {complink 5703|Texas Instruments Inc.}

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