VIDEO – Defining disaster in Japan: Impact on Japanese and global electronics industry supply chains

Map with Japanese electronics companiesJapan represents 10% to 15% of global electronics demand but 16% to 30% of electronics component supply. OEMs with meaningful cash positions are trying to pull in orders, buying up available component supplies. Taiwan printed circuit board companies like Kinsus and Unimicron could see bigger negative impacts.

The recent earthquake and resulting tsunami impacting Japan have wreaked havoc on the island nation on a grand scale. With the threat of absolute nuclear disaster lurking all eyes are focused on Japan as events continue to unfold.

Japan regional analysis (what’s different this time?)
Shun Maruyama, opining on strategy for investment bank Credit Suisse writes in one analysis the bank compares the great Hanshin-Awaji (Kobe) earthquake in January 1995 with the Sendai earthquake.

The Kobe earthquake was confined to a comparatively small area, so manufacturing was switched relatively quickly to areas not affected by the earthquake and exports / imports were re- routed to other ports.

There was only a limited decline in overall economic activity, as consumers in areas not affected by the earthquake only cut back on consumption for about one month.

In comparison, the Sendai earthquake has affected a relatively large area and manufacturing plants are also located within this area, so manufacturing may not be quickly substituted elsewhere and distribution delays are likely.

Maruyama also indicates in his repot the bank expects Japanese consumers to curb consumption for a long period across a wide swathe of the country, including the Tokyo metropolitan area, which is being affected by strong aftershocks, so manufacturing, spending, and other economic activity is likely to decline for more than one month.

Japan electronics sector / industry
Japan is a strong supplier of upstream components and materials in the electronics supply chain.

Reaching beyond Japan’s coastline and taking a look at business implications in electronics industries worldwide, Japan represents 10% to 15% of global electronics demand but 16% to 30% of electronics component supply according to a recent report by Citigroup Global Markets.

One report from Credit Suisse states the firm expects supply issues impacting the electronics supply chain will last one to three months with the greatest risks being felt in the supply of bismaleimide-triazine (BT) resin which is used for making substrates to attach electronics chips (used in smartphones / handsets) to printed circuit boards; silicon substrate, display glass (TVs, monitors…), semiconductor equipment and aluminum HD substrates.

Untold risks that could further impact the report’s findings include the degree of threat from the nuclear situation in Japan, impact of rolling power issues, impact of water issues, and transportation and logistics issues.

Global electronics demand v. supply
In looking at the global electronics supply chain where overall demand is concerned, Citigroup estimates Japan accounts for, approximately:

  • 9% of worldwide GDP
  • 14% of worldwide electronics production
  • 11% of worldwide semiconductor demand
  • 3% of worldwide handset demand
  • 5% of worldwide PC demand

Meanwhile, Japanese supplies to the worldwide electronics industry amount to:

  • 50% of the supply of semiconductor silicon substrate
  • 21% of front-end CMOS semiconductor supply
  • 16% of back-end semiconductor supply
  • 35% of total LCD glass production
  • 56% of total MLCSS production
  • 85% of BT resin production

Looking closer at wafers, a separate more detailed report from Credit Suisse discusses Japanese wafer firms Sumco and Shin-Etsu Chemical.

Sumco owns approximately 35% global market share in 300mm wafers, which account for about 80% of operating profits (FY3/11E basis). The 300mm wafer market is becoming increasingly oligopolistic, with Sumco and Shin-Etsu (the top two companies) holding a combined 65% global share.

Sumco has completed construction of new facilities (production capacity of 300,000 to 400,000 wafers / month) in anticipation of expanding demand, but these have yet to become operational.

Shin-Etsu Chemical is also a major global manufacturer of 300mm wafers used in semiconductor production (estimated 30% share).


Figure 1: Worldwide Silicon Wafer Supply

worldwide silcon wafer supply


With a large number of new semiconductor factories expected to come on line in 2011, semiconductor manufacturers will naturally need to secure wafers appropriate for their production lines, and should thus more readily accept price hikes from late 2010 to conclude long-term volume contracts.

Impacted area, company reference
Figure 2 illustrates affected areas in Japan while pinpointing locations of particular Japanese electronics company locations. Figure 3 illustrates the expanded dotted line area (see Figure 2), in more detail.


Figure 2: Japan affected area, with Japanese electronics companies

Map of Japan with electronics companies and earthquake location


Figure 3: Japan affected area emphasis, with Japanese electronics companies

Detail Japan map with earthquake-impacted electronics companies


Taiwan component sector / issues amid Japan disruption
An alternate report by investment bank Credit Suisse indicates the firm believes the printed circuit board IC substrates market (mainly BT) could likely see bigger negative impacts.

Printed circuit boards
Among Taiwan PCB companies the bank covers, Credit Suisse believes that BT-based substrate companies such as Kinsus and Unimicron may see bigger negative impacts, as the key material is mainly supplied from Japan with potential production outage currently at Mitsubishi Gas Chemical.

Meanwhile, the impact on flexible printed circuit boards (FPCB) is mainly due to production outage from JX Nippon (Japan), which accounts for 75% of the global output for RA foil.

However, the bank believes this can be partially offset by second sourcing such as Furukawa Copper Foil Taiwan, Taiwan Copper Foil and Olimbrass (US).

The impact on rigid printed circuit board production should be relatively limited if there is no disruption for end-product demand. This is because the majority of the raw materials for PCBs have been supplied by non-Japanese companies.

Optical lens
The impact on optical lens sensor components is limited, as Omnivision is now the biggest optical sensor supplier globally. High-end producer Kantatsu (Japan), has one factory located in Fukushima that has been impacted by the earthquake.

Passive components
Murata has two factories (Sendai and Tome) impacted by the earthquake. Based on Credit Suisse Japan analyst, Akinori Kanemoto, Murata’s Sendai factory makes SAW duplexer and SAW filters, and Tome is produces RF inductors. The investment bank believes no alternative Taiwan company is capable of producing these three products for handsets with large volume at the current stage.

The global number one crystal oscillator maker, Japan-based Epson Toyocom, announced its operations had shutdown following the earthquake.

According to Bloomberg, Shin-Etsu Chemical may be one of the companies hurt the most by the earthquake in Japan. However, the factory Shin-Etsu Chemical has stopped operation mainly to make silicon wafer, instead of silicone rubber (the key raw material for keypads).

Private message OEM peers. Access all content.

For electronic OEM professionals working in OEM companies. Connect with OEM peers and access exclusive content.

View 1 comment


Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

TIP: Anyone can post article comments whether or not you are registered. But, if you register or log in you can attribute your posts to your user profile in GlobalNet Community.

Your email address will not be published. Required fields are marked *



You might also like:

How to Cut Costs 5% to 15% for EMS Manufacturing Services

Provider spotlight

About is the leading online destination helping electronics OEM decision makers make more informed decisions and reduce risk. We offer educational Webinars, thousands of original articles and helpful tools, a community of influencers who understand the challenges facing your company today, and a comprehensive directory of electronics provider services.

Copyright Venture Outsource, LLC. All Rights Reserved
The material on this site is for informational purposes only and is not a substitute for legal, financial or professional advice. Distribution and use of this material are governed by our User Terms Agreement and by copyright law. By using our Website you agree to site Terms and Privacy policies. For questions please contact at 1-888-860-1193 or visit