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Last week’s earthquake in northern Japan has caused production delays and work stoppages throughout the PC industry as manufacturers including Lenovo, Toshiba, and Apple may face supply shortages and price increases -- and possibly panic buying.
Some Japanese IT factories were damaged by the earthquake and subsequent tsunami, while others were shut down as a result of ensuing power outages and concerns about aftershocks -- but the impact on the industry itself is only now starting to come to light. According to a report from IHS iSuppli, some semiconductor facilities in Japan have suspended manufacturing, as any earthquake over 5 on the Richter scale causes them to shut down automatically. Aside from the devastating impact of the disaster itself, the earthquake has caused tremors among system builders and others in the distribution channel that rely on product supply from Japan.
“Unequivocally people are talking about it -- distributors, memory manufacturers, partners are all talking about it,” said Steve Bohman, vice president of operations at Columbus Micro, a Columbus, Ohio-based system builder. “What I haven’t seen is any literal effect. After the earthquake, I fully expected prices in the memory market to spike, but a week later, aside from a few panic buyers, people are standing pat and memory prices are soft.”
Bohman said it was difficult to gauge the impact from the other side of the world. Still, he said he has heard that hard drives and optical drives in particular will see the impact of the disaster. “I fully expect to see prices go up before too long and to see shortages -- real or false -- in Flash, DRAM, hard drives and optical drives, and also LCD panels. So we shall see,” he said. “I’ve been in the industry for 20 years and I’ve seen earthquakes and fires in factory and all kinds of excuses for shortages or price increases, and you just never know if it’s real or imaginary. Or in the case of a natural disaster, you don’t know if it will affect the industry or if the industry will take advantage of it to raise prices.”
In fact, according to IHS iSuppli, several OEMs could end up panic buying from semiconductors and electronic components based on forecasts of supply disruption, as distributors experience a surge in orders from customers seeking to ensure their inventory. “I certainly expect for people to buy up in anticipation,” Bohman said. “I don’t see why you would think prices are going to drop. In my opinion that doesn’t make any sense. They are probably at bottom for the foreseeable future so why not start buying. And that’s how it starts.”
According to Nick Gold, director of business development at Chesapeake Systems, a Baltimore-Md. based system builder, the earthquake could have far-reaching effects. “The crisis in Japan is going to affect MANY aspects of the global technology industry before long,” Gold said. “I am certainly expecting supply issues across the board with fully-integrated systems, as well as individual components such as hard drives, RAM, etc. over the coming weeks.”
Gold said he expects other suppliers outside of Japan will experience a rapid increases in demand, which will be difficult for them to meet. “Even if manufacturers are located outside of Japan, individual components for various types of systems may be sourced in Japan,” he said. “And, even if this is not the case for any given product, demand pressures placed on other manufacturers who are located outside of Japan, who now need to supply more customers than they normally would because of supply problems with Japanese manufacturers, will tend to affect products across the board.”
Next: Impact On Lenovo, Apple, And Others