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U.S. tech industry braces for aftershocks from Japan disaster

Sharon Gaudin | March 17, 2011
With Japan devastated by last week's 9.0-magnitude earthquake and tsunami, the business aftershocks may rock various parts of the tech industry for months to come.

"It's hard to say which companies have been hit worst. Of course, the major name-brand Japanese companies, like Sony, Toyota and Nissan, have taken very large blows and have suspended Japanese operations for the duration of the crisis," he said. "We're going to see the effects of these closures and disruptions from other, lesser known brands in the coming weeks."

Olds also noted that recovery will be uneven, with some companies getting back on their feet sooner than others. It will all depend on how diversified their supply chain is and how badly damaged their facilities have been.

"This is a massive test of the resources of the world-wide technology infrastructure," Olds said. "Given the recession, there should be some slack production capacity out there, but how quickly can it be brought online? We just don't know yet. We also don't know if or how this might derail innovation or product advances, many of which originate in Japan."

King added that it's not only the makers of, say, chips, components and LCD screens, for example, that will be affected.

You also have to consider companies such as Apple, which use those parts in their own products. This means that smartphone and tablet makers, and automotive companies, which use a lot of chips in their vehicles, will be feeling the pinch.

And if parts are in short supply, the price will go up -- for manufacturers and consumers.

"Automakers, who are major customers of embedded processors, have expressed concerns about how component availability will affect their operations," King said. "Depending on the extent of the damage and whether vendors can shift production to other facilities or partners' operations, there could be lasting effects across electronics products of every kind."

How Japan's disaster is impacting the tech industry

* Nvidia reported that its third-party production factories are outside of Japan so unaffected by the disaster. However, executives now are in Asia, trying to deal with supply chain issues. Some of Nvidia's substrate material (used in chip assembly) comes from Japan so ongoing power issues could make it difficult to get that material by Q2, said Ken Brown, an Nvidia spokesman.

* Texas Instruments (TI) announced that its wafer manufacturing site in Miho, Japan, which is about 40 miles northeast of Tokyo, suffered "substantial damage" during the quake. TI execs estimate they should be back in full production in July and have full shipment capability in September. The company is working to shift 60% of its wafer production to other sites.


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