Japan quake shakes up global IT supply chain

Japan quake shakes up global IT supply chain

Summary: Might take up to six months before hardware supplies return to normal levels in Japan, as power rationing and damages to manufacturing plants in country affect components output, report states.

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Almost a week after the devastating earthquake and tsunami afflicted Japan on Mar. 11, technology companies based in the disaster-hit prefectures have been taking stock of the damages sustained. The resulting news has not been good, with one researcher predicting it would take up to six months for global hardware supplies to normalize.

Daniel Heyler, head of global semiconductor research at Bank of America Merrill Lynch, told tech news site Computerworld yesterday that manufacturers will have to re-examine supplies in Japan and look for alternative suppliers if needed, before finally sorting out any potential component mismatches resulting from deals with new vendors.

This reorganization of current supply chain routes will impact the overall supply of technology hardware, and Heyler predicts it will take as long as six months to resume normal flows following disruptions from the quake and tsunami.

The supply of NAND flash--storage chips used in a variety of digital devices such as smartphones, tablets and digital cameras--have been highlighted as particularly hard hit by the spate of events in Japan.

The New York Times, for instance, reported that Toshiba, the world's second-largest maker of NAND chips, behind Korea's Samsung, has closed some production lines. Sandisk, another major NAND manufacturer which jointly owns two factories in Japan with Toshiba, said its factories were operating but expressed concerns about the reliability of Japan's transportation and electricity networks.

"It will probably be many days or perhaps many weeks before we can assess the entire situation," Mike Wong, a SanDisk spokesman, said in the report.

Meanwhile, semiconductor firm Texas Instrument (TI), also issued an update on Monday saying that its manufacturing site in Miho, Japan, "suffered substantial damage" during last Friday's earthquake.

It estimated that production at the site would be reinstated in stages, beginning with several lines in May before returning to full production in September. The timeline could be delayed, though, if the region's power grid remained unstable or if there were further complications preventing the restart of its equipment, TI added.

In the meantime, the company is shifting its production load to other fabs and has identified alternate manufacturing sites for about 60 percent of Miho's wafer production.

Daiwa Securities also released a research note on Tuesday saying that global supply of lithium-ion batteries, as well as substrates for chips and power-supply capacitors may be the worst-hit technology industries.

According to Pranab Kumar Sarmah, an analyst at Daiwa, closure of plants at Hitachi Chemical, which makes materials used in lithium-ion cells, Sanyo Electric and Sony, for example, will affect the supply of rechargeable batteries.

Japan contributes almost 40 percent of the world's electronics and audio-visual components, and the quake's impact on the electronics supply chain "will be substantial", Sarmah surmised.

Power rationing affecting recovery
Besides damages to manufacturing sites, damages sustained by the Fukushima Daiichi nuclear power plant have also resulted in power rationing in several parts of Japan.

The nuclear power plant, run by Tokyo Electric Power Co. (TEPCO), supplies electricity to Tokyo and its surrounding prefectures, and its shutdown has forced TEPCO to implement power rationing for the first time in its history, according to Japanese news site Mainichi Daily News.

Ryutaro Kono, chief economist at BNP Paribas Securities Japan, said in the report that areas served by TEPCO account for some 40 percent of Japan's economic output.

"With the [power] bottleneck, industrial production would significantly fall, while deterioration in the sentiment of companies and households would seriously curb business spending, private consumption and housing investment," Kono noted.

Renesas Electronics, for one, announced on Tuesday that 8 of its 22 factories were affected by the power blackouts imposed by TEPCO. Some offices were operating only for certain portions of the day while others shuttered completely, its press release stated.

Topics: Hardware, Mobility, Tablets

Kevin Kwang

About Kevin Kwang

A Singapore-based freelance IT writer, Kevin made the move from custom publishing focusing on travel and lifestyle to the ever-changing, jargon-filled world of IT and biz tech reporting, and considered this somewhat a leap of faith. Since then, he has covered a myriad of beats including security, mobile communications, and cloud computing.

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