Japanese Earthquake to Impact Component Supply and Pricing
Dale Ford, IHS iSuppli
The Japan earthquake and tsunami could result in significant shortages of certain electronic components, potentially causing pricing for these devices to increase dramatically. While there are few reports of actual damage at electronic production facilities, impacts on the transportation and power infrastructure will result in disruptions of supply, resulting in the short supply and rising prices. Components impacted will include NAND flash memory, dynamic random access memory (DRAM), microcontrollers, standard logic, liquid-crystal display (LCD) panels, and LCD parts and materials.
Japan also is the world’s largest supplier of silicon used to make semiconductor chips—at about 60 percent of the global total. If this supply is disrupted due to the logistical and infrastructure challenges Japan is facing this will have an impact not only on NAND flash memory, DRAM, microcontrollers, standard logic, LCD panels and LCD parts, it will also affect other families of products such as discretes, i.e. MOSFETs, bipolar transistors and small signal transistors.
Infrastructure challenges will slow or suspend shipments from Japan during the next two weeks. However, the global supply chain has about two weeks of excess component inventory in the pipeline for semiconductor parts affected by the quake. Because of this, the shortages are not likely to appear until the end of March or the start of April. Just the same, these shortages and their price impact are likely to linger until the third quarter.
Before the disaster, semiconductor inventories in the global semiconductor supply chain were at high levels. The Japanese earthquake will cause the appearance of shortages to be delayed by a matter of weeks.
While actual shortages haven’t occurred yet, the disaster is already affecting component pricing, due to the psychological impact of the disaster. Pricing for higher-density NAND flash already has climbed by as much as 10 percent on the spot market, which buyers use to procure relatively small quantities of parts. However, IHS does not expect price volatility for OEM DRAM customers and it is likely that the average selling price for major OEM customers on the contract market will hold steady for sustained periods of time until the supply chain moves past the infrastructure challenges.
Spot-market DRAM pricing also is surging, rising by as much as 7 percent since Friday. Contract pricing is holding steady for the time being, but modest increases are likely as contracts are renegotiated.
Most of country’s largest electronic component producers operate their manufacturing facilities far to the south of the epicenter of the quake and the areas most impacted by the tsunami. Consequently, damage was negligible. However, companies are facing problems shipping components, receiving raw materials and getting workers to their facilities. Power interruptions also are slowing production—and can be a major impact on the operations of manufacturing facilities—depending on the type of product being manufactured.
For example, Toshiba Corp., the world’s second-largest producer of NAND flash, said shipments of NAND from its central Japan plant could drop by up to 20 percent in January and February. However, leading NAND supplier Samsung Electronics of South Korea should be able to partially compensate for the shortfall.
Furthermore, Hitachi’s fab is closest among the small/medium display facilities to the earthquake site. Production at this Hitachi fab was halted on Monday to gauge the impact on the quake. Even if no structural damages are found, production is likely to be impacted by the ensuing interruptions in the power supply. Hitachi supplies displays for the Nintendo DS handheld video game system and for LG cell phones. If the display production is shut down for a month or more, it could impact delivery of these panels.
Production from Panasonic’s 6th generation LCD fab in Japan that produces LCD TV panels for use in Panasonic televisions and in Chinese brands may have been impacted temporarily because the facility is near the earthquake’s peripheral zone. Preliminary information shows that most production of components in Japan for use in large LCD such as glass, color filters and polarizers were not impacted. However, power supply issues may impact future production and supply of the these LCD components. If production continues to be interrupted, it may impact availability and result in price increases.
There are indications of interruptions of supplies of components used to make LCD panels. Production of color polarizers at Fuji Film has been impacted, which may impact pricing of this key component.