Print 28 comment(s) - last by tng.. on Mar 21 at 1:29 PM

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.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

RE: Supplies from Japan
By The Raven on 3/18/2011 6:20:19 PM , Rating: 2
The whole event has also killed the already bad Dollar/Yen value. It seems what our last two presidents and their bailouts couldn't do, the earthquake has, driven the Dollar to even lower value.

Well we used up all the safety nets during the recession. But, it looks like that imbalance of the JPY/USD was a blip. Holy cow I am glad about that, since my job is 100% import sales. But even still it doesn't look good for my crew here even if the dollar slowly devalues against the JPY.
As of now there is one specialty part that is machined by a company in the North. Evidently no one there has answered the phone all week and we don't know the status yet.

Wow. Luckily it is not that bad for our suppliers. We have one company that has a plant just to the west of the Fukushima plant (just outside of the US evacuation area) but they are doing some sort of temporary migration to one of their other plants in the Nagoya area, but they are a very big company with capacity (and many plants) to do that. Heaven help those who who are smaller.

RE: Supplies from Japan
By tng on 3/21/2011 1:29:01 PM , Rating: 2
Love the Nagoya area. Don't know but that area was probably not that hard hit by the quake.

It does surprise me some that companies like Toyota with most of their fabrication in place in the Nagoya area are having parts supply issues, you would think that they would be less likely to have problems.

"We’re Apple. We don’t wear suits. We don’t even own suits." -- Apple CEO Steve Jobs

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki