NEW YORK —
U.S. CE inventories should be at normal levels in the short term, but the availability of certain products may become scarce and retail prices may go up as the impact of the Japanese earthquake, tsunami and nuclear accident is felt.
That was the consensus of several industry analysts and U.S. CE executives contacted by TWICE last week as reports of Japanese factories being damaged, closed or destroyed began to surface.
Many finished goods from Japanese CE makers are now made in China, Southeast Asia and Mexico. But key components for those products, such as flash memory, dynamic random access memory (DRAM), camera lenses, LCD and plasma panels, Blu-ray parts and others, are made in Japan, according to an IHS iSuppli report. Hardest hit may be lithium-ion batteries, according to a Japan Times report last week quoting the Daiwa Securities Group, because Sanyo Electric and Sony plants can’t get materials to make the batteries.
Fusion Trade, an independent electronics component distributor, issued a statement last week saying it saw prices increase between 15 percent to 20 percent on various memory components during the first weekend of the crisis. Japan has nearly 40 percent of NAND flash-memory parts coming from the region, Fusion said, and companies are buying up more parts than they actually need to prepare for anticipated backlogs and delays, rekindling the component shortage that was recently ending, probably boosting prices.
Paul Romano, COO of Fusion, told TWICE, “I think in the short term there will not be an immediate effect” of short supplies of components. “As we get out a couple of weeks, there will be a significant impact. There has been physical damage [to plants], and these components all feed into the CE industry in a big way.”
Romano expects shortages of inductors, batteries and other components designed for “MP3 players [and] gaming systems … there will be a ripple effect” if plants are down for a while, “even Apple. It will affect everyone in two weeks. We have to see how far-reaching [shortages] will be.”
Stephen Baker, industry analysis VP for The NPD Group, said that in PC components, “Japan is important but clearly not as central to the supply chain as China or Taiwan. I think the biggest impact will be the disruption on the company operations. Toshiba, Sony, Fujitsu are all important international PC companies and disruptions among their corporate employees could mean slowdown in product cycles, slowdown in product and marketing decisions etc. Those are longer term issues that could allow non-Japanese companies like Dell or HP or Acer gain some additional traction in the market.”
Sweta Dash, flat-panel component analyst for IHS iSuppli, told TWICE in flat-panel TV displays most facilities in Japan fall outside the earthquake area, with only Sharp and Panasonic having LCD factories in the country.
“Panasonic LCD has two fabs ( 6th Gen and 8th Gen) and only the 6th Gen fab is located near the earthquake peripheral zone. That fab only supplies to the Panasonic brand and some China brands. Production has been impacted temporarily as they are checking the lines after the quake. There has been some concern about three hours of power cut in that region, but [the plant] has not been impacted yet. As you can see from the TV panel side, supply impact is minimal.”
Dash noted that in February, “the U.S. market had still six to seven weeks of TV set inventories, which is considered normal to slightly high level for this time. Some brands are still trying to reduce inventories as new models are coming in. That is why I don’t see any immediate impact on finished goods supply in March.”
Production of LCD components such as glass, color filter, polarizer, LED or CCFL are reported to be fine, but Dash did agree with others, saying, “The biggest fear is power-shortage impact in future. If it continues and some factories have to face power cut, then it will impact production and supply. Most of the panel suppliers will have enough supply to take them through in the short run. But in the long run it has the potential to impact, if power issue continues for a long time.”
But even those plants that are not in the earthquake zone and are undamaged will have problems shipping and even producing goods due to infrastructure problems that will affect the entire country.
Mario Moreno, economist for The Journal of Commerce, said last week that Japanese exports “will weaken in the months ahead as the closing of several manufacturing plants prompted by electricity shortages, combines with severely damaged roads and bridges to hamper production.”
— Additional reporting by Greg Tarr and Doug Olenick