March 15, 2011

Quake Disrupts Chip And Memory Prices

Factories in Japan are closing manufacturing plants in the aftermath of the recent deadly earthquake and resulting tsunami.

Transportation infrastructure, road, ports and railways, if not damaged by the disasters are crowded with refugees and emergency traffic bypassing damaged areas, Reuters reports.

The shutdown of the Fukushima Dai-ichi nuclear plant in Fukushima province has caused blackouts and brownouts in northern Japan forcing the normal operation of factories next to impossible to maintain.

Japanese component makers, from electronics firms to automakers are keeping their plants shuttered while plans for rescue efforts are continuing and repairing basic services are only just beginning to be planned.

Approximately 20 percent of semiconductor production, including about 40 percent of flash memory comes from Japan tech manufacturers. Supplies of chips used in everything from smartphones, computers and tablets are being disrupted.

Research firm IHS iSuppli surmises that the March 11 quake will most likely result in significant shortages of some electronic parts and lead to price hikes, Bloomberg reports.

Delivery of Hitachi brand panels used by the Nintendo DS handheld video-game players and LG Electronics mobile phones may be affected if its display factory is shut for a month or longer, ISuppli claims.

Toshiba, supplier of about one-third of the world's NAND flash memory chips, said it was still inspecting its System LSI factory in Iwate and could not say when it might resume operations.

Texas Instruments warned its two suspended plants would not reopen until at least July even though it had redirected 60 percent of its output to other locations.

Sony explained that its 8 factories making equipment ranging from optical devices, IC cards, blu-ray discs, chip equipment and lithium batteries remained closed, with no plans to begin production at this time.

Prolonged supply disruptions sent tech manufacturers looking quickly for alternative sources of high-tech components. Taiwan's Wintek, which makes the touch module for the iPad 2, claims more than two weeks of inventory remaining and the short-term impact was limited.

However, a source at the company said it was looking for secondary suppliers while it Japanese production was halted.

"There are alternative sources for Japanese raw materials and Taiwan is also capable of producing many of the components that we are currently importing from Japan," said Luo Huai-jia, vice president of Taiwan's electrical and electronic manufacturer's association.

"We also have other sources such as France that we can tap if inventories tighten."

Initial concerns of disruptions concerning the automobile industry appear to be overstated during the first few days of the disaster.  Instead, steel makers were likely to face slowdowns in demand as automakers halt production for days. Auto plant closings include the factories of Toyota, Honda and Nissan vehicles.

Korean shipbuilder Hyundai Heavy Industries explains the steel supply situation was better than initially suspected.

"We expect the steel plate supply to get back to normal within one month. Sumitomo, one of our Japanese suppliers, has the biggest problem among them, given bad logistics and part of production halt," a spokesman told Reuters.


On the Net: