Composition board siding is also known as "pressboard siding", "hardboard siding", "waferwood siding" and "inner-seal siding". All these names refer to the composite wood product made from wafers of wood, coated in resin and formed into a mat. An overlay is placed over the mat and pressed into the panels by heat and pressure and the panels are then cut into boards to make lap or panel siding. The major manufacturers of this product include Louisiana-Pacific (L-P), Georgia-Pacific and Masonite, usually identified by the manufacturer’s seal on the underside of the siding board.
Wood, by its very nature, has a tendency to expand and contract. Compressing the wood during the manufacturing process has placed the wood in an unnatural state. Wood will expand if it is exposed to moisture—the compressed cells in the wood will expand and swell. Proper installation and maintenance are critical for this product to perform. Exposed edges must be sealed with a good coat of paint, and the wood must remain sealed throughout its life. If the composition board siding is improperly installed or maintained, the siding retains moisture and begins to swell, crack and rot.
Several class action lawsuits are taking place throughout the country involving different composition board manufacturers. The only way to determine which product is installed is to remove a section of the siding and look for the manufacturer’s identification number. Once the product is identified, the owner can register in one of the many class action lawsuits to obtain relief. The following are the major composition board siding manufacturers:
The above was found on US Inspect - a home inspection website. I have personally had experience with this pressboard (compostion) siding on a garage. I have replaced a few bad sections where the end corners begin to delaminate and crumble. The nails can't hold onto what is basically a saw dust type of material. This siding was 12" and 3/8" thick. I have seen patches done with matching thicknesses of plywood which of course can be cut to width and length for the patch area. Make sure you either prime and or paint the plywood. It probably should be exterior grade and maybe if you can find it a smooth surface on the outside (check plywood face grades). As long as the section above is good (and below for that matter), just pry it off gently and carefully so you don't do any damage to the finish of other sections. Any nicks should be sealed especially the cut ends. Then pry the above section gently out a small amount to allow for the sliding of the cut patch plywood so it can be slid up under the above section and overlap the bottom section. Be sure to seal the ends with chaulk and make sure it lines up with the existing lines. Nail in place and Viola! You could try something I did which was to smear chaulk on the outside on some primed replacement pieces. I think a thin layer of chaulk can be rolled out to seal the surface as well. Use a J roller or old rolling pin or section of leg from an old chair or piece of old pipe conduit or etc. No warranty or gaurantee and Your mileage may vary (YMMV).