While we in the states may not have felt the tremors of Japan’s March 11th earthquake, the electronics industry as a whole is still trembling from the shock. While it’s true that most of the electronics we use today are actually manufactured in China or Taiwan, Japan has retained production of many of the individual components used to create items like laptop computers, smart phones, and tablet PCs. Thus even the temporary loss of Japanese contributions to the global electronics supply chain is sure to have some serious effects on the industry as a whole.
Japan’s Place in the Global Electronics Supply Chain
As I mentioned above, most electronics companies house their final-assembly production facilities in Taiwan or China, explaining the “Made in China” that likely appears on the back of whichever device you’re using to read this. Many of the parts used in these facilities, such as motherboards, flash memory, and battery cells, are made in Japan however. The market research company iSuppli, for example, recently publicized a teardown of Apple’s new iPad2 (check it out here) and identified five internal components that are native to the island nation. Additionally Japanese production facilities account for a large number of IC (integrated circuit) chips as well as the silicon wafers used in processor production. Printed circuit boards and capacitors used in motherboard production, hardened glass for tablet screens, and many other components can all be traced to Japan’s state of the art production facilities.
What Exactly Happened?
While the earthquake and resulting Tsunami don’t seem to have caused significant direct damage to any of facilities in question, the resulting loss of power and infrastructure along with the general chaos cause by such an event, has understandably halted much of Japan’s production. The much publicized Fukushima nuclear power plant problems and other losses have left millions out of power and caused power rationing in less effected areas. Freight shipping in and out of Japan is also likely to be more difficult over the next couple of weeks as well and will add yet another hurtle to the recovery.
The Short Term
The news came today that Shin-Etsu Chemical Co. Ltd. and MEMC Electronic Materials Inc., have both suspended operations in certain production plants which together account for a quarter of the world’s silicon wafer production. Silicon wafers are key components in semiconductor devices which are found in practically every electronic device on the planet. These specific plants produce 300mm silicon wafers which are key pieces in the production of DRAM and NAND flash memory. Mitsubishi Gas Chemical and Hitachi Kasei Polymer, who jointly produce 70% of the copper-clad laminate required for printed circuit boards used to create computer motherboards and other controllers, have also temporarily ceased production.
Apple’s new iPad2 will likely see shortages as a result of the quake as well. Japanese facilities are the source of many of the new tablet’s proprietary pieces, including the ultra-thin lithium-ion battery, an electronic compass, and the hardened glass which covers their LCD screens. Apple is also the single largest consumer of the NAND memory I mentioned above, claiming a full 20% of the overall supply.
The Long Term
While US end-users can expect to see short-term price hikes on products like flash memory and DRAM, it will be larger companies, like Apple, Dell, and other corporations that will feel the biggest strains. These companies will have to find other, likely more expensive sources for the materials they need to maintain their product flow. Higher production costs will mean tighter margins, lower profits, and drops to stock values. If alternate sources cannot be located, US consumers will see stock shortages that can wound large companies much deeper. The crisis will also affect Japan’s buying power for a time, resulting in further revenue loss for US based electronics companies.
While the production loss is obviously bad for Japan, it may be good for other countries. Emerging tech powers in Taiwan and Korea will likely be called upon to fill the economic vacuum, and may provide a slight stepping stone for these countries.
What’s your opinion on the current situation in Japan? Comment and share your thoughts and opinions! If you liked this article please share it with your friends through one the of the social media buttons below. And as always be sure to shop OutletPC for all your PC needs!