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TMCNet:  In Silicon Valley, no immediate threat to supply chains from Japan disaster

[March 15, 2011]

In Silicon Valley, no immediate threat to supply chains from Japan disaster

Mar 15, 2011 (San Jose Mercury News - McClatchy-Tribune Information Services via COMTEX) -- Despite the widespread devastation in Japan, experts don't see imminent dangers to global tech supply chains that Silicon Valley companies depend on.

Japan is a powerhouse in production of high-end technology commodities, but most of the nation's industrial complexes are located in the south, far from the destruction in the north. However, experts caution that it's too soon to tell whether Japan's badly damaged infrastructure could delay shipments by high-end manufacturers or whether highly sophisticated and sensitive manufacturing equipment was damaged by the intense ground shaking.

"It's really too early to tell what is going to change and what is not," said Jim Handy, the principal analyst at Objective Analysis.

Last year, Japanese companies racked up 13.9 percent of all global electronic equipment factory revenue, according to an IHS iSuppli estimate. The country's sophisticated manufacturing includes computers, consumer electronics devices and communications gear. Japan produced $216.6 billion worth of electronic equipment in 2010.

Apple likely safe Apple depends on Japanese vendors to supply at least one key component of its iPhones and iPads, NAND memory -- also known as flash memory -- which is used for storing content such as pictures, music and video. Toshiba and other Japanese companies account for 35 percent of global NAND flash production in terms of revenue, IHS iSuppli said.

As the world's largest consumer of flash memory, though, Apple is known to rely on a number of suppliers, analysts say. The Cupertino company, which usually does not comment on its complex supply chain, had no comment Monday regarding how the Japan earthquake may or may not affect its business.

Analysts say Apple may have sold as many as 1 million iPad 2 tablets after its Friday launch, and any serious crimp on the supply of flash memory could hinder future sales. However, should flash memory supply problems develop, Apple most likely would be the last company to suffer, Handy said.

"Everybody else is going to get short shifted before they do," he said. "As a supplier, who are you going to decide doesn't get something that is in limited supply? All these small guys may be here or not (in the future). But Apple will always be there. So it's best to be on the good side of Apple." Apple is not the only company that has developed redundant vendors. In a statement, Peter Chou, CEO of Taiwan-based mobile phone maker HTC, which produced the first Google phone, said his company should be able to weather any potential supply problems.

'Operating as normal' "HTC global supply chain and distribution channels remain unaffected and operating as normal," he said in the statement. "We have a comprehensive business continuity strategy and framework in place, which activates a secondary supply chain in the event of a crisis or natural disaster, such as last Friday's massive earthquake." Milpitas-based SanDisk, maker of flash memory cards, has two joint-venture semiconductor plants with Toshiba in Yokkaichi, Mie prefecture, about 500 miles from the quake's epicenter. Both of the fans were shut down briefly Friday, and no injuries were reported.

The company reported "minimal immediate impact on wafer output," though that is an early assessment, spokesman Mike Wong said.

The two most pressing concerns for industry are damage to the transportation infrastructure and reliability of power, said Dale Ford, senior vice president at IHS iSuppli. It could take as long as two months to resolve those problems, he added.

"The bigger problem is logistics -- shipping products and material into and out of the country and ongoing blackouts," Ford said. "That is not compatible with efficient manufacturing processes." Japan-based semiconductor companies ranked No. 3 in chip manufacturing, IHS iSuppli reported.

Many Silicon Valley companies, though, rely on Taiwan's contract semiconductor companies to provide chips for tech gadgets and most likely won't see any supply problems in the wake of the earthquake.

"Most PC manufacturers don't have very high exposure to things mostly made in Japan," Handy said.

Contact John Boudreau at 408-278-3496.

Japan's 2010 Global Tech Footprint 13.9 percent Japan's share of global electronic equipment factory revenue $63.3 billion Amount Japanese companies generated in microchip revenue, representing 20.8 percent of the worldwide market 10 percent Japan's slice of the worldwide pie of DRAM manufacturing based on wafer production 35 percent Japanese companies' share of NAND flash production revenue No. 3 The rank of Japanese companies in semiconductor production among the world's major chip manufacturing regions Source: IHS iSuppli estimate To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to Copyright (c) 2011, San Jose Mercury News, Calif.

Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit

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