Thursday, April 28, 2016

3rd Sony's Update on Kumamoto Fab Starus

Sony updates on the Kumamoto fab status today: Operations at Sony's Kumamoto Technology Center (located in Kikuchi Gun, Kumamoto Prefecture), which is the primary manufacturing site of image sensors for digital cameras and security cameras, were halted and currently remain suspended. With aftershocks continuing and employee safety the foremost priority, inspections of the facility and the development of a recovery plan remain ongoing. The current status of operations for the Kumamoto Technology Center is as follows:
  • Damage to the building itself has been confirmed to be primarily to the upper layer of the building, and reinforcement work will be carried out in this area.
  • The clean rooms used for wafer processing and manufacturing equipment, both located on the lower layer of the building have not been significantly damaged, and preparations are now underway to resume production. Manufacturing operations are targeted to resume around the end of May 2016.
  • Regarding back-end processes, such as assembly and measurement, as well as processing operations for components such as camera modules, which are carried out on the upper layer of the building, Sony has confirmed that there is damage to the clean rooms, manufacturing equipment and other equipment. Further analysis of the extent of this damage is currently underway.
  • Damage to finished product inventory such as image sensors at Kumamoto Technology Center is limited, and shipments of these products have already resumed. The status of semi-finished and uncompleted products is currently being confirmed.
The impact of the earthquakes on Sony Corporation's consolidated results continues to be evaluated. In the Devices segment, there is expected to be direct physical damage to Kumamoto Technology Center. Sony expects to incur expenses primarily for recovery and reinforcement work in response to the physical damage to the relevant portion of the Kumamoto Technology Center. Sony may also incur large opportunity losses, mainly in the Devices and Imaging Products & Solutions segments due to suspension of production for a certain period of time.

In addition, due to the suspension of manufacturing operations at Kumamoto Technology Center and potential disruption to the supply of components to Sony from certain third-party suppliers that also have manufacturing facilities in the Kumamoto region, it is possible that business operations within the Mobile Communications, Game & Network Services and Home Entertainment & Sound segments also may be affected. This potential impact is currently being evaluated.

Update: SeekingAlpha earnings call transcript explains more on the fab structure:

"Kumamoto TEC is extremely close to the epicenter of the - the largest earthquake that happened on April 16. It is a primary manufacturing site for image sensors for digital cameras and security cameras, as well as for the micro displays that go into projectors.

Kumamoto TEC has a bilayer structure with clean rooms in each layer. The clean rooms in the lower layer contain our wafer processing equipment and the clean rooms in the upper layer contain our testing equipment, camera module production equipment and other equipment.

The clean rooms in the lower layer, and the production treatment inside these clean rooms have not sustained significant damage. Since yesterday we have begun to start‐up the equipment in those clean rooms, and we expect to resume production in these rooms around the end of May.

On the other hand, the upper layer clean rooms did sustain damage and we are not able to say yet when we will restart operations. Damage to Kumamoto TEC's finished goods inventory is limited, and we are currently inspecting the status of its work‐in‐ progress inventory.

In the Devices segment, we expect there to be direct physical damage to Kumamoto TEC, and we expect to incur expenses primarily for recovery and reinforcement work. In addition, there is a possibility that large opportunity losses will be incurred, mainly in the Devices and Imaging Products & Solutions segments due to suspension of production at Kumamoto for a certain period of time.
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