Watch for tight supply, higher component tags

In the latest component supply update after last week’s earthquake and tsunami in Japan, IHS iSuppli reported that the industry could see significant shortages in the coming weeks along with significantly higher prices, mostly due to impacts on transportation and the power infrastructure. This means buyers will have to keep a close watch on NAND flash memory, DRAM, microcontrollers, standard logic, LCD panels, and LCD parts and materials.

In addition, because Japan is the world’s largest supplier of silicon used to make semiconductor chips, accounting for about 60 percent of the total, disrupted supply could also impact the availability of other components such as discrete semiconductors including MOSFETs, bipolar transistors and small signal transistors, said IHS.

IHS expects that shortages aren’t likely to occur until the end of March or early April due to about two weeks of excess component inventory in the pipeline for semiconductor parts impacted by the quake. However, expect slow or suspended shipments from Japan during the next two weeks, said the market research firm.

These shortages and price hike impacts are likely to remain until the third quarter, said IHS.

Although there aren’t shortages yet, component pricing is on the rise due to the psychological impact of the disaster, said IHS. Pricing for higher-density NAND flash has increased by as much as 10 percent on the spot market and spot pricing for DRAMs has risen by as much as seven percent since March 11.

However, IHS does not expect price volatility for OEM DRAM customers. Average selling prices (ASPs) for major OEM customers on the contract market are likely to remain steady for sustained periods of time until the supply chain moves past the infrastructure challenges, said IHS, though there may be modest increases as contracts are renegotiated.

Companies are facing problems shipping components, receiving raw materials and getting workers to their facilities, while power interruptions are slowing production, said IHS.

Toshiba Corp., the world’s second-largest producer of NAND flash, told IHS that shipments of NAND from its central Japan plant could drop by up to 20 percent. However, leading NAND supplier Samsung Electronics of South Korea should be able to partially compensate for the shortfall, said IHS.

In addition, Hitachi’s fab, which is closest among the small/medium display facilities to the earthquake site, halted production on Monday to evaluate the impact from the quake. IHS says production is likely to be impacted by power supply interruptions even if no structural damage is found. Hitachi supplies displays for the Nintendo DS handheld video game system and for LG cell phones.

Production from Panasonic’s 6th generation LCD fab in Japan that produces LCD TV panels for use in Panasonic televisions and in Chinese brands may have been impacted temporarily because the facility is near the earthquake’s peripheral zone, said IHS.

Most production of components in Japan for use in large LCD such as glass, color filters and polarizers were not impacted but there are indications of interruptions of supplies, including production of color polarizers at Fuji Film, said IHS.

According to DisplaySearch, some TFT LCD factories located in the impacted area, including Hitachi Display (Chiba prefecture), NEC’s Gen 2 (Akita prefecture), Toshiba’s Fukaya and Ishikawa factories, and Epson’s Gen 2, were reportedly not damaged by the earthquake.

But it’s likely that these factories have halted production to gauge the impact and calibrate the facilities, said David Hsieh, vice president, Greater China Market, DisplaySearch, in a blog. “These factories are all focused on small/medium panels, and their share in the industry is very minor. We are assuming that there will be no major impact to the TFT LCD industry as a result.”

Hsieh also noted that the majority of the TFT-LCD industry is not located in the area most heavily impacted by the earthquake. Sharp’s Gen 8 and Gen 10, Panasonic LCD’s Gen 8, and NEG’s glass tanks are all located in the Kansai area, which does not appear to have been impacted by the earthquake. Key LCD component makers, including Nitto Denko, DNP, Sumitomo, Toppan, and Corning, have located most of their facilities in west Japan and do not appear to be impacted, he added.

However, Toppan and DNP have color filter factories in Niigata and Saitama prefectures, respectively, which are in the impact zone. The impact to the supply chain is likely to be insignificant, even if these plants have been damaged because the color filter lines are older Gen 3-3.5, said Hsieh.

Panasonic LCD’s Gen 6 fab, located in Chiba close to the earthquake, does not appear to be damaged, Hseih said.

See related articles:

Supply chain impacts of Japan earthquake tragedy
Update: Earthquake in Japan could impact IC supply