Japan Disaster Could Lead to Considerable Supply Chain Issues

By Beecher Tuttle March 14, 2011

The massive 8.9-magnitude earthquake that struck off the coast of Japan on Friday has forced a number of technology companies to temporarily close their doors, which could lead to significant production delays and global supply chain lapses.

Power outages and port closures have affected a number of Japanese technology firms, especially those that manufacture products and components for the consumer device space. While most companies were shielded from the direct effects of the earthquake and the correlating tsunamis, nearly every major player in the industry has recently closed multiple plants while they evaluate the damage and wait for the conclusion of rolling power blackouts, according to a recent Wall Street Journal report.

The companies that are most likely to be affected by delays are those that rely heavily on semiconductor chips and LCD displays – two areas where Japanese suppliers dominate.

"The major impact on Japan's semiconductor production is not likely to be direct damage to production facilities, but disruption to the supply chain," research firm IHS iSuppli noted in a statement. "Suppliers are likely to encounter difficulties in getting raw materials supplied and distributed and shipping products out.

IHS iSuppli said that the disruption in supplies should continue for at least the next two weeks. Japan currently accounts for more than 20 percent of the global semiconductor market.

Companies that manufacture devices that rely on Japan's memory chips and other components could be forced to increase their prices in the near future.

"We expect phenomenal price swings and large near-term shortages as a result of this earthquake," Jim Handy, an analyst at Objective Analysis, told the Wall Street Journal. Companies that make products like LCD televisions, smartphones and tablet devices could be greatly affected.

The earthquake and following tsunamis have hurt other companies as well, including automobile manufacturers like Toyota and Honda. Both car makers have shut down their operations in Japan for the time being.


Beecher Tuttle is a TechZone360 contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.

Edited by Tammy Wolf

TechZone360 Contributor

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