If supply chain is broken it could mean higher prices or shortages of gadgets

Supply chain of components could be hit by Japan crisis

Technology suppliers have warned that the devastating earthquake in Japan could hit the supply of electronics components.

Leading chip industry supplier Japan, which produces around one-fifth of the world’s semiconductor supply, has seen several factories producing electronic parts closed since the crisis.

Suppliers have warned that if the supply chain is broken for just a few weeks this could lead to higher prices or shortages of electronics such as tablets, smartphones and computers.

"It is reasonable to expect that the events in Japan will affect supply of components but it is too early to say to what extent," leading mobile telecom equipment maker Ericsson said.

Research firm ISH iSuppli said that even if damage to electronic production facilities turns out to be limited, power and transport disruption could result in significant shortages of some electronic parts and lead to big price hikes.

Supplies of NAND flash memory chips used in mobile devices, dynamic random access memory (DRAM), microcontrollers, standard logic, liquid-crystal display (LCD) panels, and LCD parts and materials could be affected.

Earl Lum, head of telecom gear and component research firm EJL Wireless, said this was bad news for the telecom equipment making sector, which was already suffering shortages before the earthquake.

“Even before the crisis the industry was near capacity,” he said. “Pretty much everything is halted or mostly halted through April and I would expect an impact to Q1 and also for Q2.”

Supply disruption is already driving prices for key technology parts higher - spot prices of NAND flash chips rose nearly three per cent on Tuesday after a 20 per cent jump on Monday, while DRAM memory chip prices gained 0.2 per cent on top of a seven per cent rise on Monday.

Kingston Technology, one of world's largest suppliers of DRAM and NAND memory, said some market reaction had been "of a speculative nature," however "there is a valid concern about the disruption to the logistics chain of some DRAM chip manufacturers outside Japan."

"In semiconductor production a temporary stop to the lines usually means that everything that was on the lines at that moment (and a production process takes several weeks) has to be discarded as junk," Kingston said in a statement.

Even if shipments of semiconductor parts were disrupted for only two weeks, shortages and their price impact would probably linger until the third quarter, iSuppli said.

Ericsson said that while it was too early to assess the impact of the earthquake on the industry, it did not expect a “material impact” on its first quarter sales.

Taiwan's Wintek, which makes the touch module for the iPad 2, said it had more than two weeks of inventory left and the short-term impact was limited.

Nokia Siemens said that it sourced a “small number” of components from Japan but could not assess the impact on future supply.

"The supply of critical radio components such as surface acoustic wave (SAW) filters and oscillators has been disrupted,” Lum at EJL added.

“We expect that supply will remain restricted through April and this will impact manufacturers such as Alcatel-Lucent, Nokia Siemens Networks, Ericsson, Huawei and ZTE which are shipping wireless infrastructure equipment.

He added that if the disruption to the supply chain continued there would not be sufficient inventory to fill the gap.

"With the nuclear issue still unclear this won't be fixed anytime soon. I don't expect inventory to be more than 2-3 weeks in the supply chain," he said.

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