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While threat of radiation to U.S. might be exaggerated, global supply chains are in danger

In addition to the loss of life and property, the main story coming out of Japan after the devastating 8.9-magnitude earthquake last week is the threat of nuclear meltdown and radiation. And while reports of the risk of its effects on the United States have been generally flawed and sensationalized, the disaster has economic implications for the entire world.

Case in point: Reuters is reporting that at least two LCD-producing assembly plants in Japan will both be out of commission for at least a month. A Toshiba Corp. plant and a Hitachi Ltd. plant are reported to be halting production of small LCDs. 

Toshiba's plant near Tokyo, which makes LCDs for smartphones, is busy repairing equipment knocked out of alignment by the quake, a Toshiba rep told Reuters. Another Toshiba plant in Japan was undamaged.

"Given that the market for smartphones outside Japan is pretty active, supply disruptions there could cause problems for some handset makers of some models," Damian Thong, an analyst at Macquarie Capital Securities told Reuters. The two Toshiba factories account for an estimated 5 percent of the global small LCD display market, he said.

Toshiba also made some of the reactors at the Fukushima nuclear plant and has experienced a 30 percent drop in its shares this week.

Meanwhile, Lenovo has expressed concerns over its parts supply. "In the short term there won't be much impact. We are more worried about the impact in the next quarter," Lenovo CEO Yang Yuanqing told reporters in Shanghai. Lenovo shares were also down -- 4.1 percent in day trading.

The regional disruptions, which have affected supplies of car parts and semiconductors as well, could threaten global supply chains and impact economic growth around the world. Key suppliers for batteries for notebook computers, such as Sony, have also shut down factories.

"Sony and Sanyo would be two of the key suppliers, and Sony has essentially shut down five or six of its factories in Japan so that's clearly going to cramp the battery supply for notebook PCs, where you see Lenovo making a big push these days. It's going to cast a lot of uncertainty over their Q2 ability to make shipments," Michael Clendenin, managing director of RedTech Advisors, told Reuters.

And it doesn't stop there. Ericsson, Alcatel-Lucent and STMicroelectronics also chimed in with warnings of limited supplies. In response, Taiwan -- whose economy is based largely on the high-tech sector -- has considered cutting tariffs on components if supply shortages continue.

"The impact from the earthquake has been limited as most companies have inventories at hand. But we're closely watching the power disruption situation in Japan. If necessary we'll consider lowering import tariffs on components," Lien Ching-chang, deputy director general of the Industrial Development Bureau of the economics ministry in Taiwan, told Reuters.

But if companies turn to suppliers outside of Japan, there could still be a struggle to meet demand. "If everyone is turning now to these secondary or back-up sources at the same time, the back-up source is not going to have the capacity to handle everything," Clendenin said.

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It was bound to happen...
By Moishe on 3/18/2011 2:54:41 PM , Rating: 2
It was bound to happen... Japan is a production powerhouse. Lots of things are gonna cost more.

On a side note, I think I see my car in that article picture! :D

RE: It was bound to happen...
By The Raven on 3/18/2011 3:24:35 PM , Rating: 2
If you look at the plates that run under Japan (and I mean subduction faults people, the crazy kind) you can see that there will always be craziness going on over there. I'm born and raised NorCal, but I swear I experienced more seismic activity during my short time in Japan then I had my entire life along the more mild San Andreas strike-slip.

RE: It was bound to happen...
By Ammohunt on 3/18/2011 3:25:27 PM , Rating: 2
Japan = 12% of the global economy! big ouch look to pay more later

RE: It was bound to happen...
By cruisin3style on 3/19/2011 4:15:27 PM , Rating: 2
Pretty sure most estimates peg Japan at less than 10%...nominal figures might be in the 8-10%, but PPP numbers will be more like 7% or less

RE: It was bound to happen...
By AssBall on 3/18/2011 4:02:46 PM , Rating: 2
With any luck the production of animated monster pr0n and game shows where people get hit in the balls will continue as scheduled.

Japanese TV is so strange.

RE: It was bound to happen...
By Moishe on 3/18/2011 4:36:59 PM , Rating: 2
Yes... but fortunately lots of those things are distributed online or already hosted over here! Yay for the interwebs!

I saw an article in the paper today that said that 75% of Priuses are made (assembled I assume?) in the USA. Of course the demand is high enough that they are still selling for sticker price.

South Korea and Taiwan have taken over a lot of the traditional Japanese production, but they are still huge. I hope they can get everything settled quickly for everyone's sake.

RE: It was bound to happen...
By BZDTemp on 3/18/2011 5:34:56 PM , Rating: 2
Not as strange as Italian TV!

Women dressed as prostitutes in pretty much every program be it news or entertainment. Oh, and the head of state owns pretty much every channel plus has arranged for laws making satellite channels extra expensive to boost his monopoly.

RE: It was bound to happen...
By Camikazi on 3/19/2011 4:26:23 PM , Rating: 2
Scantily clad women are not stranger then the alien pr0n anime that japan has :P

RE: It was bound to happen...
By Iaiken on 3/18/2011 6:51:52 PM , Rating: 1
Japanese TV is secret yankee culture poison.


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