Asia And The IT Supply Chain: Could A Link Break?

Asia At The Center Of The Global IT Supply Chain

A combination of low labor costs, talented workforces, and strong design skills turned Asia into the center of the world's IT supply chain. Vendors and VARs worldwide depend on Asian manufacturers for the components needed to bring their IT products to life.

But such concentrations come at a price. An earthquake, tsunami, or some other man-made or natural disaster could disable part of that infrastructure and result in widespread shortages and price increases for components, which could impact the ability to deliver servers, storage, networking gear and other hardware.

Turn the page for a country-by-country look at Asia's part in the global IT supply chain according to a 2013 study by research firm IHS. While the data presented shows the percentage of manufacturers that have their headquarters in each country rather than the percentage of components manufactured there, the conclusion is the same: A disaster in Asia is a disaster for the world.

Japan

Japan is no stranger to disaster. The country sits on the Ring of Fire, an area of volcanic activity that stretches all around the Pacific Ocean, and is susceptible to earthquakes. And, given Japan's island nature, those earthquakes occasionally result in devastating tsunamis.

According to IHS, Japan is home to the headquarters of producers of:

-- 60 percent of the world's silicon wafers

-- 55 percent of the world's image sensor makers

-- 41 percent of the world's optical component manufacturers

-- 37 percent of the world's microcontroller developers

-- 33 percent of the world's display drivers

-- 18 percent of the world's semiconductor manufacturers

-- A variety of key materials and chemicals

South Korea

South Korea has been relatively free of problems from natural disasters, and manufacturing there is smooth despite occasional protests.

However, South Korea is home to the biggest "what-if" in the global IT supply chain: the potential of a second Korean War.

According to IHS, South Korea is home to the headquarters of producers of:

-- 66 percent of the world's DRAM

-- 49 percent of the world's data flash memory

-- 49 percent of the world's large LCD panels

-- 20 percent of the world's display drivers

-- 15 percent of the world's small and medium LCD panels

Taiwan

Taiwan, like Japan, sits right on the Ring of Fire, and is regularly battered by earthquakes, which in the past have seriously disrupted semiconductor production. The island is also hit by several typhoons every year.

According to IHS, Taiwan is home to the headquarters of producers of:

-- 75 percent of the world's small and medium LCD panels

-- 69 percent of the world's pure-play foundry business

-- 44 percent of the world's display drivers

-- 32 percent of the world's large LCD panels

-- 13 percent of the world's semiconductor supply

China

China, with its huge low-cost workforce and a massive manufacturing infrastructure that over time has seen component suppliers set up next to sites where final assemblies are made, is the world's production center, and IT is no exception. While earthquakes and typhoons are regular happenings in China, they seldom impact the country's manufacturing. However, cramped living conditions have made China one of the top potential sources of pandemics, as was seen in the recent SARS and bird flu outbreaks.

According to IHS, China is home to the headquarters of producers of:

-- 70 percent of the world's mobile PCs

-- 70 percent of the world's mobile handsets

Thailand

Thailand hadn't really been thought of as a place where disasters might have a significant impact on the world's IT business until the great Thailand flood of 2011, which inundated enough factories to knock out about 30 percent of the world's hard disk supplies. That included both hard-drive production lines, and the production facilities for many of the components that go into hard drives.

According to IHS, Thailand is home to the headquarters of producers of:

-- 20 percent of the world's hard drives and related components