Electronics Supply Chain to Fully Recover from Japan Disaster in Q3 - Market Analysts

Electronics and Semiconductor Industries on Track to Recover from Japan Earthquake in Several Months

by Anton Shilov
06/29/2011 | 06:18 PM

With some companies having already recovered from the Japanese earthquake, the entire electronics industry is expected to complete its rebound from the disaster by the end of the third quarter, according to new IHS iSuppli research.

Everything "OK" by September


Electronics companies with operations near the epicenter of the quake that had suffered building and equipment damage are expected to restore full shipments by early September, six months after the quake, which occurred on March 11, 2011. The restoration will coincide with the peak season for electronics and semiconductor sales in the third quarter.

The duration of production disruptions varied depending on distance from the earthquake epicenter. Affected companies that were farthest from the epicenter took only one to two weeks to restore production, while companies closest to the disaster could take as long as four to six months to return to normal - depending on their response to the disaster.

“In the history of the electronics supply chain, nothing has had such a broad impact as the Japan earthquake, tsunami and nuclear disaster. The worldwide repercussions of the catastrophe illustrated the global and interconnected nature of the electronics industry, with the impact of the disaster reverberating through the materials, components and equipment segments of the supply chain. However, even the semiconductor companies suffering the most direct damage from the quake, full production will resume near the end of the third quarter,” said Dale Ford, senior vice president for semiconductor market intelligence at IHS.

IHS has identified 14 semiconductor suppliers and four silicon wafer makers in Japan that were impacted by the quake.

Recovery Timing Unexpected

The timing of the recovery will be fortuitous. Following normal seasonal patterns, global semiconductor revenue growth will hit an annual crescendo in the third quarter, with a sequential rise of 7.4%. This compares to a 1.4% decline in the first quarter, a 2.9% increase in the second quarter and a 3.1% rise in the fourth quarter.

The disaster also had varying impacts on assorted segments of the semiconductor market. The impact was most severe on automotive equipment, given that Japan accounts for 31.5% of global semiconductor production for automotive electronics. Consumer electronics bore the next greatest impact, with a moderate effect on production. Here, Japan is responsible for 45.1% of global consumer electronics semiconductor production.

In comparison, the impact on the wireless and data processing semiconductor markets was mild, while the wired communications segment was not affected at all.



Fujitsu Shows Example How to Recover

The impact on specific companies also varied according to their level of exposure to the catastrophe and the effectiveness of their disaster-response efforts.

Fujitsu has distinguished itself with the most rapid and efficient recovery effort among all Japanese semiconductor suppliers, according to IHS. Despite facilities close to the epicenter of the earthquake, the company said it had attained full recovery to pre-disaster production levels at five chip plants on June 9.

The main factor propelling Fujitsu’s fast recovery was the company’s disaster-response strategy implemented three years ago following an earthquake in Japan’s Iwata prefecture. The company operates semiconductor manufacturing facilities in various parts of the world, allowing it to pick up the slack if one region is hit by a disaster. Fujitsu also has an effective plan that can restore electricity, water and other utilities at disaster-stricken plants.

Furthermore, the company in the past had installed equipment that could seismically isolate damage to semiconductor wafers, which succeeded this time in mitigating the impact of the earthquake.