Japan Disaster puts Supply Chain in Disarray

Japan Disaster puts Supply Chain in Disarray

Ivy Tsui is a JD candidate at Osgoode Hall Law School.

Almost a month after the disaster in Japan, dire effects are still emerging. Global companies, including Sony, Apple Inc., and Nokia, are facing a supply shortage in parts and components, thus causing major disruption to their supply chains.

Twelve Sony plants in Japan have already been closed and five more locations may have to suspend or reduce their production if the shortage continues. Moreover, production of Sony PlayStation game consoles would have to be shifted overseas. Digital camera maker Canon, in a press release on its official website, also said that their operations may have to be suspended for more than a month and may have to rely solely on operation sites in Japan that have not been affected.

An estimated 60% of the global silicon wafers supply, which is used to manufacture integrated circuits and other micro devices, originate from Japan. Japan is the fifth-largest semiconductors supplier in the world. After the earthquake, the stock prices of chipmaker companies, including Micron Technology and SanDisk Corp, rose 3.2% and 1.8% respectively due to the drop in supply. Other companies not based in Japan, including Apple Inc., suffered due to the lack of NAND flash memory chips, which are made by Toshiba Corp and SandDisk in Japan. Apple’s current flagship product, the iPad 2, also contains numerous parts that are produced exclusively in Japan. Hence, its supply might be affected and would not be able to match current market demands.

Malcolm Penn, chief executive of the research firm Future Horizons, said that the disruption of the supply infrastructure will be most evident in three months. Chief executive Yang Yuanqing of Lenovo also told BBC News: "In the short term, there won't be much impact. We are more worried about the impact in the next quarter."

The refusal of shipping companies to go to Japan would further exacerbate this problem. Due to the fear of radiation exposure and their overall safety, some German ocean freight companies have reportedly been avoiding the Tokyo Bay area.

The Japanese government has requested that factories and citizens conserve electricity during these difficult times. Yet, given the economic interests at stake, electronic companies are unlikely to comply. This disruption to the global economy is causing far-reaching supply chain issues that could potentially get worse in the future.

Perhaps it is time to buy that gadget you have always wanted before it gets too expensive or its supply runs out!