Entering text into the input field will update the search result below

How the Quake Affects the Chip Supply Chain

Mar. 15, 2011 9:42 AM ETINTC, QCOM, AVGO, WDC2 Comments

By Martin Lariviere

The human toll of the Japanese earthquake clearly is the main story right now. There is also a supply chain story which while not as pressing right now is likely to be playing out over the coming weeks and probably months. Japan is a global supplier to many industries — particularly for semiconductors. Marketplace had the following graphic of the semiconductor and memory plants that have been affected (Earthquake in Japan jolts global supply chain, Mar 14).

The impact of the quake was fast and widespread.

Immediately after the quake on Friday, semi-conductor plants more than 500 miles away from the epicenter shut their operations. That’s like a quake in Richmond, Va., knocking out factories north of Boston, or one in San Diego shuttering factories in the suburbs of San Francisco.

Furthermore, these disruptions could go on for some time. It is not necessarily an issue of factories being damaged but that it is really hard to make precise, high-tech products with unreliable power.

Dean Freeman [a semi-conductor analyst at Gartner]: A bigger issue for Japan is the overall power situation. Right now they are shutting off power for eight hours a day, so that means semi-conductor plants going to have to figure out how have to work around the power outages. … If you are in the middle of a process at 1200 degrees C, and you have to shut the power down before you are done, there is going to be an impact.

With such a sharp reduction in supply, something has to give. In the near term that is going to be price. The Wall Street Journal reports that there has already been steep increases in prices for commodity electronic components (Quake Sparks Tech Supply Shortage Concerns, Mar 14).

Prices of the

This article was written by

Professor Gad Allon joined the faculty at the Kellogg school of Management in 2005, after completing his Ph.D. in Decision, Risk and Operations at the Columbia Graduate school of Business. His research interests include operations management in general, and service operations and operations strategy in particular. Recently, Professor Allon has been studying models of information sharing among firms and customers both in service and retail settings. Professor Allon also studies supply chain models of global dual sourcing. He is also conducting empirical studies to investigate time-based competition in the fast food industry as well as the factors contributing to emergency department overcrowding.

Recommended For You

Comments (2)

Silicone Dynamics profile picture
Even though most of our parts come from China I believe that having Japan's capabilities reduced will put a greater demand upon China's factories which could lead to shortages in China. I would also think that as the Japanese population start to purchase new items to replace items that were destroyed this would also put a strain on the supply chain in China.

Silicone Dynamics, Inc.
Custom Silicone Keypads
Hysteria about chip shortages is, as usual, overblown. Most impact will be in the DRAM and NAND markets, where the Japanese producers account for 40% of supply.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.