CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

Is there a silicon lining from Taiwan&#039s earthquake?

The earthquake in Taiwan measured 7.6 on the Richter scale and killed more than 1,500 people. It may also mean D-day for Taiwan's DRAM manufacturers, and potential trouble ahead for any company along the PC manufacturing chain that uses something made in Taiwan.

Shares in European and American semiconductor firms spiked up in response to news of the quake, but settled down on news that damage to Taiwan's foundries is still uncertain.

"Shoot first, ask questions later," was the market's strategy, said Carl Johnson, an analyst at Infrastructure, an Austin, Texas-based research firm. "Emotionally the market says, DRAM, fabless companies, the whole PC market could be affected. It could also disrupt the supply of motherboards, and have an interruption on revenue streams."

But the reality is that it's too early to assess the damage to the tech sector.

Most foundries, or semiconductor manufacturers that make chips for third parties, are located in Taiwan. Companies that outsource, such as PMC Sierra Inc. (Nasdaq: PMCS) could be adversely affected, while others, who compete with Taiwanese manufacturers in dynamic random access memory (DRAM) chips, such as Micron Technology, Inc. (NYSE: MU) could get a boost from the disaster.

If indeed foundries have been leveled, "its probably good news for the chip industry - it will probably put upward pressure on chip prices," said Dan Scovel, an analyst at Fahnestock and Company. It's just a scenario at this point, he added, predicting a wait of several days before the toll of the quake is known.

Here's a look at some of the stocks worth watching as the Taiwan damage is assessed:

  • Taiwan is home to Micron Technology's rivals in DRAM market. Shares in microchip maker Micron strengthened in pre-market trading, up to 80 on the Instinet electronic broker system from a Monday close at 79-5/16. By Tuesday afternoon, they had retreated 2 1/2 to 77 1/2.

    Taiwan firms account for about five percent of the world DRAM market but their share is closer 12 percent including outsourcing for Japanese and other makers.

    DRAM manufacturing would be much more complicated to resume than most other operations, Scovel added. Though he doesn't expect any third quarter problems. The fourth quarter, however, could become an issue.

  • Intel, and other semiconductor companies such as Atmel Corporation (Nasdaq: ATML), could also be affected by the earthquake, said William Milton Jr., analyst for Brown Brothers Harriman & Co. An Intel spokesperson said Tuesday that it does not produce (Dynamic Random Access Memory) chips -- the main sector analysts saw as potentially hit by the quake. Intel does have customers in Taiwan, though, and the supply of other personal computer components, for instance motherboards, could also be disrupted, affecting business.

    "If motherboard production is interrupted, it would have a pronounced affect on Intel," Scovel said. Intel gets about 80 percent of revenue from the sales of microprocessors, he added. Intel shares were down 15/16 to 83 1/8.

  • Intel challenger Advanced Micro Devices Inc. (NYSE: AMD) could also suffer some aftershocks from the earthquake. Damage to flash chip manufacturers could impact the flash memory market, which is "already tight," according to Milton. This could have serious consequences for AMD, which derives about 20 percent of its revenue from flash memory, Milton said.

  • Apple has manufacutring of its iBook outsourced to Taiwan, and a number of computer companies, such as Compaq Computer Corp. (NYSE: CPQ), and IBM (NYSE: IBM) have outsourced lower-end models there as well, said Milton.

  • Graphics companies could also suffer some fall-out, according to Scovel. He named S3 Inc. (Nasdaq: SIII), ATI Technology Inc.(Nasdaq: ATYT), nVidia Corp (Nasdaq: NVDA) and 3dfx Interactive Inc. (Nasdaq: TDFV), which all their foundry work done in Taiwan, as companies that could be in a sinking ship together.

  • Most European semiconductor firms surged in reaction to news overnight, but pared gains as the impact on the island's chip production proved uncertain. Reactions were mixed. Some companies, like Dutch Philips, the world's eighth biggest chip maker, would be hit by its stakes in Taiwan, but Germany's Siemans AG, the 10th biggest, could benefit from any temporary boost in DRAM memory chip prices

    Reuters contributed to this report.