Japan quake disrupts world technology supply chain

Last week's devastating earthquake will affect shipments in the short term

Japan is a central hub of the technological supply chain, and the consequences of the catastrophic 8.9 magnitude earthquake that hit the country March 11 are beginning to come into clearer focus.

Infrastructure, electric power supply and fears of meltdowns at nuclear plants are the biggest concerns for the people of Japan and its industries in the short term. Ports, airports, roads and rail lines have all been disrupted because of the quake with some of the major industrial export ports facing months of rebuilding before they'll be able to resume normal output.

Yet, it looks like some of the major manufacturers of NAND flash-memory wafers and other semiconductor plants were relatively unharmed outside of minor damage and power outages caused by the earthquake. NAND flash memory, used in devices such as USB drives, smart phones and tablets, has been a major driver of mobile computing over the last decade. Toshiba and SanDisk factories produce flash memory south of Tokyo. The epicenter of the earthquake and subsequent tsunamis was located in northeast Japan, approximately 250 miles from Tokyo.


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According to the Wall Street Journal, the joint venture factories of Toshiba and SanDisk felt modest impact. Toshiba accounts for 35 percent of the world’s flash-memory output.

SanDisk issued a press release March 11 stating that its factories in Yokkaichi Mie Prefecture were operational as of Friday.

“The epicenter of the powerful earthquake was approximately 500 miles from Yokkaichi, Mie Prefecture, Japan, the location of the two Toshiba-SanDisk joint-venture semiconductor manufacturing plants, Fab 3 and Fab 4,” the SanDisk release stated. “Both fabs were down for a short period of time due to the earthquake and were back up and operational as of Friday morning, Pacific Time. There were no injuries to SanDisk employees based in Japan. SanDisk's current assessment is that there has been minimal immediate impact on wafer output due to the earthquake. SanDisk continues to assess the situation for any potential future impact that may arise from issues related to Japanese infrastructure and the supply chain.”

Research firm IHS iSuppli Market Intelligence has released a report on the state of the Japanese technology industry and what some potential effects from the earthquake might be:

  • Japanese suppliers accounted for more than one-fifth of global semiconductor production in 2010. Companies based in Japan generated $63.3 billion in microchip revenue in 2010, representing 20.8 percent of the worldwide market.
  • Japan-headquartered companies in 2010 ranked No. 3 in semiconductor production among the world's major chip manufacturing regions.
  • DRAM manufacturing in Japan accounts for 10 percent of the worldwide supply based on wafer production.

The Wall Street Journal reported March 11 that two manufacturers of microcontroller chips – Freescale Semiconductor and Renesas Electronics – were affected by the quake. The Freescale factory, located in Sendai in Miyagi Prefecture which was closest to the epicenter, was evacuated and without power. Microcontroller chips are used in devices that are automatically controlled, such as automobile engine control systems.

Sony has suspended production in eight plants in Miyagi and Fukushima Prefectures (Fukushima is located directly south of Miyagi) and will affect its output of “magnetic tape, optical films, laser diodes, lithium-ion rechargeable batteries, CD, DVD, and Blu-ray discs” according to technology blog Engadget.

The biggest problem for Japanese manufacturers will be electricity as the nuclear plants affected by the earthquake struggle against meltdowns. Prime Minister Naoto Kan announced Sunday that nine prefectures in Japan will face rolling blackouts, according to the Japan Times. The report cited Economy, Trade and Industry Minister Banri Kaieda saying that Japan’s energy needs amount to 41 million kilowatts per day but the country currently only can produce 31 million kilowatts. The Toyko Electric Power Company has said that the rolling blackouts might last until the end of April. Toshiba issued a release saying it would adhere to TEPCO’s decision.

The problems facing Japan are steep in the aftermath of the earthquake, and the world technology supply chain will be affected in the short term as the country works to remedy its damaged infrastructure. Overall, though, it appears that the major manufacturers of the country missed the brunt of the earthquakes force and will be able to resume production, though probably not export scale, in the near future.

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