March 18, 2011 / 7:48 AM / 9 years ago

Supply concerns grow as Japan lacks parts, power, people

TOKYO/SEOUL (Reuters) - From Apple Inc’s (AAPL.O) new iPad to Chevrolet pick-ups and many of the world’s airplane kitchens, concern is spreading down the global manufacturing supply chain about the impact from Japan’s earthquake last week.

Plant shutdowns across Japan following the earthquake, tsunami and nuclear crisis threaten supplies of everything from semiconductors to car parts to manufacturers across the globe.

Even where factories in Japan are operating, power outages, shortages of fuel and raw materials and ruptured logistics mean products and parts face delays in getting to customers.

Honda Motor Co (7267.T) said on Friday it extended a production halt in Japan, where it makes more than a fifth of its cars, for a further 3 days until next Wednesday.

And, citing a memo distributed by the automaker, the Wall Street Journal reported Honda had warned U.S. dealers it was not sure if it could resume full production at some of its Japanese plants before May.

Japan’s grip on the global electronics supply chain is causing particular concern. The world’s third-biggest economy exported 7.2 trillion yen ($91.3 billion) worth of electronic parts last year, according to Mirae Asset Securities.

“Should the Japan crisis be prolonged, I expect a shortage of electronic parts in the second quarter,” said James Song, an analyst at Daewoo Securities, noting Japan provides 57 percent of the world’s wafers, used to make the chips that go into mobiles phones, cameras and other electronic devices.

Apple may face shortages of key parts for its newly-released iPad 2, according to a report from research firm IHS iSuppli.

Several parts of the new version of the popular iPad tablet PC come from Japan, including the battery and the flash memory used to store music and video on the device.

“Logistical disruptions may mean Apple could have difficulties obtaining this battery, and it may not be able to secure supply from an external, non-Japanese source,” iSuppli said.

Toshiba Corp (6502.T), one of the companies that produces the NAND flash memory used in the iPad 2, according to IHS iSuppli’s research, had briefly shut a flash memory facility in Japan, and warned it could face problems getting raw materials.

Apple launched the iPad 2 in the United States last week to strong demand, with many stores selling out and analysts estimating sales of 1 million units during the debut weekend.

Several other iPad 2 parts are sourced from Japan, said the IHS iSuppli report, noting some of these, particularly the chips, could be procured from alternative suppliers.

Goldman Sachs warned of potential bottlenecks in the supply of silicon wafers, conductive film used in LCD circuits and resin used to connect chips to boards — products made by Japanese companies such as Shin Etsu (4063.T) and divisions of Sony (6758.T), Hitachi (6501.T) and Mitsubishi (7280.T).

In Taipei, shares of electronics supply companies rebounded from recent falls, with Hon Hai Precision (2317.TW) and touch panel maker Wintek 2384.TW both gaining more than 1 percent.


Japan’s top car manufacturers including Toyota Motor Co (7203.T) and Nissan Motor Co (7201.T) are struggling to restart production amid a shortage of parts, labor and power following the 9.0 magnitude earthquake and tsunami.

The largest U.S. automaker, General Motors Co (GM.N), said it would temporarily idle a pick-up truck plant in Louisiana, where it builds the Chevrolet Colorado and GMC Canyon models, due to a parts shortage stemming from the crisis in Japan.

“Like all global automakers, we will continue to follow the events in Japan closely to determine the business impact,” GM said in a statement on Thursday.

North American output is likely to be affected unless Japanese suppliers revive their plants and send parts within 10 days, Wolfe Trahan & Co analyst Tim Denoyer said in a note.

Renault Samsung, the South Korean unit of French car maker Renault SA (RENA.PA), said it will cut back on weekend and overtime production because of a potential parts shortage, and

GM’s South Korean unit said it was considering a similar move.

“We have an inventory until the end of March. But we expect the crisis to be prolonged until April before being normalized in May,” said a spokesperson for Renault Samsung, which makes one in every 10 Renault vehicles.

A Japanese company that makes galleys for the long-awaited Boeing (BA.N) 787 Dreamliner, said it could face delivery delays due to scarce gasoline supplies.

Jamco (7408.T), which ships the galleys from Yokohama port after making them at a plant in Murakami, Nigata, in northwest Japan, said production was unaffected, but delivery could be hampered by gasoline supplies and higher prices.

Reporting by Alexei Oreskovic in San Francisco, Isabel Reynolds in Tokyo and Miyoung Kim in Seoul, Writing by Ian Geoghegan; Editing by Lincoln Feast

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