MY Automotive (NEUTRAL), MY Semiconductor (POSITIVE) - Assessing the preliminary impact of Kyushu's twin earthquake

Reported on news, Toyota, Nissan, Daihatsu, Mitsubishi, Renesas and Sony is expected to halt their production following the twin earthquake over the last week (magnitude-6.2 on Thursday followed by magnitude-7.3 on Saturday).

Automotive (NEUTRAL) – Bigger impact from production halt at Nissan and Daihatsu?

• Negative impact on TCM? Nissan’s Fukuoka plants in Kyushu, slightly damaged by the earthquake, accounts for about half of Nissan’s production in Japan. Further clarity needed from management on whether any CKD kits or cars are imported from the Kyushu plants which produces the Serena, Teana, Murano and Note models.
• Negative impact on Perodua? One of Daihatsu’s largest car production facilities (~50% of global production) in Nankatsu and Oita near the border of the Fukuoka prefecture might be affected. Also, any disruption at Daihatsu’s engine plant in Kurume would also impact the supply chain. However, we note that Perodua has been reducing its reliance on imported parts following the commencement of its new engine and gearbox plant beginning 4Q15 at Sendayan, Negeri Sembilan. We do not rule out the possibility of a shift in production to Malaysia’s plants (a mirror to Daihatsu’s Japan plants) should there be a prolonged disruption (also depending on whether the new Malaysian plants are up to standard).
• Small impact on UMWH. Toyota’s production halt in Kyushu would impact production of its Lexus models (HS, ES, CT, RX and NX models). Lexus models only accounted for 2% of UMWH’s Toyota vehicle sales in 2015.

Semiconductor (POSITIVE) – Supply chain disruption to Apple iPhone from Sony’s production halt?

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• Sony accounts for 40% of world’s CMOS (complementary metal-oxide semiconductor) sensors, used in camera modules. Depending on the severity of Sony’s production halt, this could cause a supply chain disruption for Apple’s iPhone which uses Sony’s CMOS sensor. Should there be a supply chain disruption, Globetronics’ supply of the 3D-Imaging sensor could see deferment as well – a negative impact.
• Further automotive supply chain disruption from negatively-impacted Renesas. As a key supplier of automotive microchip controlling everything from fuel injection to airbag, prolonged halt in production could result in a global supply chain disruption as exhibited in the 2011 Japan earthquake when one of Renesas’s halted for months.