Weeks after freeze, Samsung's Austin fab remains shut down

Weeks after it was shut down amid power outages during last month's Texas freeze, Samsung's Austin fabrication facility still has not resumed operations. The situation is likely costing the technology giant millions of dollars, industry experts said. 

Coupled with the simultaneous shutdown of NXP Semiconductors' two Austin fabrication facilities, the situation is turning into an "economic disaster for the semiconductor industry in Central Texas," said Ed Latson, executive director of the Austin Regional Manufacturers Association.

Samsung, which is the biggest electricity user on Austin Energy power grid, and NXP were among several large industrial power users that were ordered to shut down their Austin operations the week of Feb.15. 

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Power was restored to Samsung's facility on Feb. 20, but the company confirmed it has not yet resumed work at its Austin fab.

"While we are currently making efforts to resume operations as soon as possible, the process may require more time to reach normal levels as we inspect and reconfigure the facility,"  Samsung spokeswoman Michele Glaze said. "Our primary focus is to ensure safety on-site for our workforce as well as our community."

In February, a consortium that negotiates with Austin Energy on behalf of the city's biggest users of electricity confirmed that the city had ordered the companies to idle or shut down as more than 180 power-generating plants failed across the state, bringing the Texas power grid close to collapse. The plant shutdowns came as many Austin homes were without power and residents were dealing with potentially dangerous conditions

NXP Semiconductors, which has two Austin facilities that powered down and saw its power restored about the same time as Samsung, had also not resumed operations as of Friday and had no estimate to share at the time, according to a report from the Austin Business Journal. 

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"We are diligently working through product, equipment, and system assessments to resume our operations as soon as possible," company spokeswoman Jacey Zuniga said when the NXP facilities were shut down in February. "This process may require more time to reach normal levels due to damage caused by utility disruptions and other site impacts from the winter storm. Our focus is on the health and safety of our employees and the Austin community."

The facilities produce a notable percentage of the world's semiconductor chips. ExtremeTech, a trade publication, estimated that Samsung's Austin facility produces about 5% of the world's 300-millimeter wafers in a given month. Bloomberg Intelligence estimated that NXP's facilities account for about 37% of the company's total production.

Latson, of the Austin Regional Manufacturers Association, said some of Central Texas's semiconductor companies have been able to restart parts of their operations but others remain fully down. His organization works with about 1,700 companies with operations in Central Texas, including Samsung, NXP Semiconductors and National Instruments.

"This is the worst economic disaster for the semiconductor industry in Central Texas in my time" leading the association, Latson said.

It's not clear when the facilities will return to operations, or to what extent any equipment or products were damaged as a result of the shutdown. Estimates for the total cost of the shutdown vary, but experts agree it could be costing Samsung millions of dollars. 

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Matt Bryson, an analyst and senior vice president of research for Wedbush Securities, estimated that Samsung's Austin facility accounts for about a quarter of its output, which could mean the shutdown could cost the company about $10 million a day. He estimated the multiweek shutdown could cost Samsung hundreds of millions of dollars, not including any costs tied to damaged equipment. 

"Chips coming from Samsung's fabs are oftentimes only a small part of the value of finished goods. Any inability to manufacture devices or systems due to Samsung's troubles could have far greater implications for their customers' customers," Bryson said. 

Roger Kay, an industry analyst with Endpoint Technologies Associates, said the losses for the companies could vary depending on lost product or other damage, but said the number could potentially be as high as $3 million a day. 

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The losses could also go beyond the loss of manufacturing time for the facilities, which normally run 24 hours a day for years on end without shutting down. The facilities manufacturer wafers, which are a thin slice of semiconductor. Once a wafer is in the production process, which can take 45 to 60 days a batch, shutting down can lead to loss of product and represent weeks of lost work. 

Restarting a factory also takes time, not only to power back up to necessary levels, but to make sure everything is sterilized and working properly, industry experts say.

Patrick Moorhead, an industry analyst and founder of Austin-based Moor Insights and Strategy, previously said that he has never seen a fab return to operation without problems following a power outage. One molecule of water could completely halt production, he said, and on top of that, a fab uses very specific gasses, liquids and matter that is hard to store and bring out. 

Generally, he said, any outage past a week or two could signal a major issue. This could range from anything from low efficiency to having to fix a liquid line that froze.

Latson said the Texas freeze caused a loss of water and power simultaneously to the fabrication facilities, and gave the companies little time to prepare.

"This was kind of a double whammy you lose power, and you have all the challenges with that goes with that and also you had a freeze which damaged a lot of facilities and equipment," Latson said. 

Latson estimated the companies use about 150 megawatts of power a day, and therefore can't be run or idle fully on backup generators. Latson said because the facilities were completely shut down, clean rooms were flooded with particles and every piece of equipment was contaminated. 

The shutdowns also came as Samsung says it is considering Austin for a significant expansion.  In early February, Samsung officials confirmed that Austin is among a number of locations under consideration for a $17 billion state-of-the-art chip plant. The company is also considering other regions including New York and Arizona. The company is seeking more than $1 billion in taxpayer-subsidized incentives from local government entities, according to documents filed with the state.  

Latson said he was confident in Central Texas's ability to retain and attract semiconductor facilities despite the problems related to the winter weather. 

"I believe that the track record of Texas power grid has been very reliable. I think there's confidence that from a statewide perspective we're going to address the weatherization issues that caused this crisis," Latson said. "We're going to work with city leaders and utilities to make sure they understand what's critical for semiconductors to thrive. I believe if they can address those concerns, then Austin should still be a really strong candidate to win that business." 

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Weeks after it was shut down amid power outages during last month's Texas freeze, Samsung's Austin fabrication facility still has not resumed operations. The situation is likely costing the technology giant millions of dollars, industry experts said. 

Coupled with the simultaneous shutdown of NXP Semiconductors' two Austin fabrication facilities, the situation is turning into an "economic disaster for the semiconductor industry in Central Texas," said Ed Latson, executive director of the Austin Regional Manufacturers Association.

Samsung, which is the biggest electricity user on Austin Energy power grid, and NXP were among several large industrial power users that were ordered to shut down their Austin operations the week of Feb.15. 

More: Tesla is quietly plugging a mega-battery into the Texas power grid

Power was restored to Samsung's facility on Feb. 20, but the company confirmed it has not yet resumed work at its Austin fab.

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