A split-second power disruption at a Toshiba Corp. factory in Japan could hurt shipments and raise prices for one of the world's most widely used computer chips, a mainstay of devices like smartphones, tablet PCs and digital music players.
Toshiba said the power outage could cause a 20% drop in its shipments over the next two months or so of chips known as NAND flash memory, which are used to store music, photos and data in products such as Apple Inc.'s iPhone and iPad.
Toshiba, which makes the chips in partnership with Silicon Valley company SanDisk Corp., represents about a third of the market as the second-largest supplier of the chips after Samsung Electronics Co.
After the next couple months, the outage isn't expected to have a significant impact on world-wide shipments of flash memory. Some big buyers of the chips, such as Apple, have long-term supply arrangements with multiple chip makers.
But the temporary disruption comes as demand for NAND flash is surging, notably from companies hoping to offer new tablet computers to challenge the iPad. Market watchers say some companies could face tight supplies and higher prices just as they are trying to ramp up production.
"I don't think it could come at a worse time," said Krishna Shankar, an analyst at ThinkEquity.
Toshiba's troubles started early Wednesday when, according to power supplier Chubu Electric Power Co., there was a sudden drop in voltage that caused a 0.07-second power interruption at Toshiba's Yokkaichi memory-chip plant in Mie prefecture.
Even the briefest power interruption to the complex machines that make chips can have an effect comparable to disconnecting the power cord on a desktop computer, since the computerized controls on the systems must effectively be rebooted, said Dan Hutcheson, a chip-manufacturing analyst at VLSI Research in San Jose, Calif.
For that reason, chip companies typically take precautions that include installing what the industry calls uninterruptible power supplies. Part of Toshiba's safeguards didn't work this time because the voltage drop was more severe than what the backup system is designed to handle, a company spokesman said.
Power outages frequently cause damage to chips, which are fabricated on silicon wafers about the size of dinner plates that may take eight to 12 weeks to process, Mr. Hutcheson said. Wafers that are inside processing machines at the time of an outage are often ruined, he added, though many that are in storage or in transit among those machines are not.
In some cases, a shutdown of the air-purifying and conditioning system that keeps air in a chip factory free of dust also could contaminate chips.
Mr. Hutcheson compared the situation to cutting off the power to an artificial heart machine in the middle of an operation. "You lose the patient," he said. On the other hand, he said that Toshiba's estimate of the impact is a worst-case scenario that may wind up to be substantially less.
Toshiba estimated that its shipments of NAND flash memory could decline by as much as 20% through February as a result of the outage. Based on the company's share of the market, such a reduction would translate into a 7.5% cut in world-wide shipments over that period, but a much smaller percentage for all of 2011, estimated Michael Yang, an analyst at the technology market research firm iSuppli.
"The impact for the year is nothing," Mr. Yang said, though he added it could temporarily raise NAND prices.
Such problems are far from unprecedented.
In August 2007, a power outage at Samsung's memory-chip plant near Seoul forced the company to temporarily halt some production lines.
Mr. Yang said that cased prices for chips to rise for a few months.
Timothy Luke, an analyst at Barclays Capital, estimated the outage would reduce 2011 NAND flash chip supplies by 3% to 5%, possibly boosting prices to the benefit of rivals such as Samsung and Micron Technology Inc.
A SanDisk spokesman declined to comment on the outage.
One mitigating factor is that chip demand is typically lighter in January and February than other parts of the year, which could reduce the chances of a shortage.
On the other hand, demand for NAND chips has been rising at an unusual rate, driven largely by sales of smartphones and tablets. ISuppli in September predicted that global shipments of NAND flash-memory chips by volume would jump 70% next year.
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