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Disasters hit electronic makers hard

By Shi Jing (China Daily)
Updated: 2011-03-18 06:49

SHANGHAI - Don't bother with the salt and the iodine. Rather than public health in China, the emergency at the Fukushima nuclear power plant in Japan is a far greater threat to the electronics market.

Japan is the chief supplier of the chips at the heart of cell phones, laptops and television sets manufactured in China. And the recent disasters have disrupted operations for many Japanese chip makers. Industry experts predict normal production won't resume for months.

The effects of an impending supply shortage are already being seen in consumer electronics malls in Shanghai, Beijing and other cities. The prices of various memory chips have jumped an average of more than 10 percent in the past few days, according to the Beijing-based ChinaByte.com, a website for IT professionals.

That has resulted in a nearly across-the-board rise in the prices of a wide range of electronic goods. The price of the 16-gigabyte Kingston flash memory card used in many digital cameras, for instance, has gone up by nearly 10 percent to 250 yuan ($38) since Tuesday, when many Japanese electronics parts makers said publicly that they were closing down some of their plants.

Ma Renmei, a sales manager in the Cybermart, a digital market in downtown Shanghai, said the price of the discounted 16-gigabyte first generation iPad has risen by 100 yuan.

"We have to raise the price of everything in our store, including the Canon lenses and the Sony Playstations, because of the expected short supply," Ma said. She predicted that prices will go up a further 20 percent to 30 percent in coming weeks and advised potential customers to "buy what you want now".

The massive earthquake may even lead to breaks in the supply chain of the global IT industry, according to the Topology Research Institute, a Taiwan-based research firm specializing in that industry. That's because it's difficult to find suppliers of certain electronic goods in places other than Japan.

"The earthquake will exert the greatest impact on the production of High Density Inverter panels, which are the most important components of smart phones," said Yang Shengfan, a deputy director of Topology. "The consequences for the manufacture of silicon wafers and the production of notebook batteries will follow."

"Since the country has seen from 6 percent to 10 percent of its electricity supply cut off, production in the IT industry in Japan will be reduced by 20 percent. And it will greatly affect the figure for the global market in 2011," Yang said.

Toshiba, which produces a third of the entire supply of a certain type of flash memory chip used in cameras, smart phones and tablet computers, closed its factories in areas with power outages on March 14.

But the demand for the memory chips has been surging, led by sales of mobile devices and tablets like Apple's iPad 2, which are numbered at an estimated 1 million units, Reuters reported on Tuesday.

The response in the market came instantly. According to The New York Times, prices for the chips rose from $7.30 to $10 in a week's time on the daily spot market, where many manufacturers buy components.

And a certain type of flash memory chip, produced by Toshiba, has become more popular on the Chinese market. Chinese factories that are working for Toshiba and whose suppliers are based in Japan are adjusting their production schedules to protect themselves in case the Japanese suppliers run out of stock, according to a buyer from a Shanghai-based company trading in electronic parts, who declined to give her name.

Because of the short electricity supply, Sony is suspending production at eight factories that make optical devices, integrated circuit cards, blu-ray discs, chip equipment and lithium batteries, according to the company's website.

Sony's factory in Fukushima, which produces lithium batteries, was hit by the earthquake. Topology predicts that the prices of such batteries will increase and that Sony and Lenovo will be faced with the greatest difficulties among the leading makers of laptops.

If Japan's experience in the Great Hanshin Earthquake of 1995 is any indication, the Japanese electronics industry will need more than half a year to recover. Topology believes the damage done by the recent earthquake will be largely repaired within six months and the industry in Japan will return to form by September, when the world demand for electronics will reach its peak for the year.

China Daily