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Japan after the Quake

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Manufacturers Worldwide Brace for Semiconductor Shortage

April 4th 2011

Technology - Computer Chips

Technology prices are set to rise after a chemical plant damaged by the Tsunami has been highlighted as a core producer of a unique resin used by nearly half of the world's semiconductor manufacturers

Semiconductors are used to manufacture a broad variety of complex technology based components used in everything from cars to LCDs. And the resulting global shortage of this unique resin will drive semi-conductor manufacturing delays and costs up, which will be passed through the supply chain to end user prices.

Auto plants in the USA and Germany have already confirmed they are looking closely at their supply chain to define future product levels; many are heavily reliant on electronic component manufacture in Japan.

The Sendai plant also produced copper-based products and solvents for cleaning Printed Circuit Boards (PCBs). Both are further critical materials used in the production of key technology components. And whilst many large manufacturers have already invoked Business Continuity plans to overcome short-term supply issues, concern is rising over medium to long term plans to overcome a global shortage.

IT materials are at the start of the supply chain—an issue at this birthing stage of products has a knock-on effect further down the chain globally.

South Korean and Taiwanese semi-conductor manufacturers have confirmed they are unsure how long existing inventories of materials will last or how logistics, power or staffing disruptions will impact supplies. Fuel shortages in Japan are significantly disrupting logistics, which is hampering alternative supply routes.

Changing to an alternative resin source is a major issue, as its characteristics influence overall design and performance of a semi-conductor and therefore the end-user product. This is the cleft stick in the middle of the IT supply chain. Redesign is both time- and money-sensitive.

The full impact of this disaster is still not clear but we can see a pattern of short-term power and fuel shortage limiting production in Japan that will influence delivery of products well into the future and some brands are already defining product shortages April onwards. Additional nuances like unique chemical supply are adding to the complexity of Japan’s supply chain challenges.

Iain Bowles has been in the IT industry for several decades, and is widely respected for a deep understanding of the IT supply chain and cost structures. This article was adapted from the EE Times.

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