Quake May Disrupt Production Of Popular Electronics
Friday, March 18, 2011
Delays in chip production could mean longer waits for the new iPad and fewer deals on other hot items.
Japan manufactures about one-fifth of the world’s semiconductors, which are used to make cell phone and computer parts.
Japan also supplies 40 percent of the world’s flash storage chips, used in smart phones, digital cameras, MP3 players, iPods, tablets like the iPad and eBooks such as the Amazon Kindle.
Toshiba, which has a design center in San Diego, first introduced the NAND flash chips in 1989.
After the 8.9 magnitude earthquake last Friday, production came to a halt for several hours at many factories, even though most semiconductor and chip plants are several hundred miles south of Sendai, the epicenter of the quake.
Jim Handy is with Objective Analysis. The semiconductor analyst said even brief interruptions in production are significant.
"It could have serious repercussions, because Toshiba had a power outage in December that was only .07 seconds, but it still reduced their chip output for 2 months by 20 percent," Handy said.
He said delays in shipments will also hurt supply.
"The transportation snarls are probably the biggest concern because everything in Japan moves by rail, so they may not be able to get raw materials for their parts or the parts themselves out of the factories and to their customers," Handy pointed out.
Most electronics manufacturers keep the smallest possible inventory on hand, typically a week to two weeks worth of supplies, following the Just-in-Time management system.
"Near term reduction in the number of chips could impact the goods that appear on our shelves. There might be waiting lists for high demand items," Handy said.
This could mean longer waits for the new iPad and fewer deals on other hot items.
Electronics and telecom companies with a presence in San Diego had mixed reactions to the aftermath.
Qualcomm said its supply chain would not be affected, since it has geographically diverse suppliers.
On the other hand, Sony Electronics, whose corporate headquarters is in San Diego, said group operations have been impacted. It has facilities in Sendai and factories near the Fukushima nuclear plant, which have ceased operating.
Sony also said production was temporarily suspended voluntarily, in many other plants, to alleviate power outages.
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