Japan Quake Impacts Global Technology Supply Chain

Tuesday, March 15, 2011

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Analysts are scrambling to determine the possible impact the massive earthquake and tsunami may have of on the global technology supply chain.

Japan sustained damage to a great deal of the nation's critical infrastructure, including major shipping ports, railways, roads, and power supplies.

While many production facilities did not sustain significant damage in the disaster, the biggest problem facing industry will involve the availability of electricity needed for production.

IHS iSuppli Market Intelligence has produced a report that examines the potential affect of the quake on the Japanese technology industry:

  • The major impact on Japan’s semiconductor production is not likely to be direct damage to production facilities, but disruption to the supply chain. Suppliers are likely to encounter difficulties in getting raw materials supplied and distributed and shipping products out. This is likely to cause some disruption in semiconductor supplies from Japan during the next two weeks, based on the IHS iSuppli preliminary assessment of the situation.
  • Japanese suppliers accounted for more than one-fifth of global semiconductor production in 2010. Companies based in Japan generated $63.3 billion in microchip revenue in 2010, representing 20.8 percent of the worldwide market.
  • Japan-headquartered companies in 2010 ranked No. 3 in semiconductor production among the world's major chip manufacturing regions.
  • DRAM manufacturing in Japan accounts for 10 percent of the worldwide supply based on wafer production.

According to an article in Computerworld, Taiwanese manufacturers are busy trying to determine the impact on production because of an anticipated shortage of raw materials supplied by Japanese companies.

"There will be an impact, but we don't know how big. We are trying to understand it, but we can't get through to our suppliers yet," said Powerchip Vice President Eric Tang.

There is speculation that shortages may cause prices for some consumer goods to increase significantly.

"Whether it affects the end user depends on whether you're talking about items of necessity. Prices would definitely be adjusted, but for things that are less necessary, the public level's of acceptance would be lower," said Chen Hung-yi of Taishin Securities.

The disaster is likely to have a negative impact on the already struggling global economy for some time.

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