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Components set to run short, rise in price

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As mop-up operations continue in the quake- and tsunami-hit regions of Japan, and the looming threat of a nuclear disaster threatens, the electronics industry is bracing for component prices to increase due to interrupted supply chains within the island nation.

IHS iSuppli’s Dale Ford writes that the disaster could result in significant shortages of certain electronic components, potentially causing pricing for these devices to increase dramatically.
“While there are few reports of actual damage at electronic production facilities, impacts on the transportation and power infrastructure will result in disruptions of supply, resulting in the short supply and rising prices. Components impacted will include NAND flash memory, dynamic random access memory (DRAM), microcontrollers, standard logic, liquid-crystal display (LCD) panels, and LCD parts and materials,” he writes.
Japan also is the world’s largest supplier of silicon used to make semiconductor chips – at about 60% of the global total. If this supply is disrupted due to the logistical and infrastructure challenges Japan is facing this will have an impact not only on NAND flash memory, DRAM, microcontrollers, standard logic, LCD panels and LCD parts, it will also affect other families of products such as discretes, bipolar transistors and small signal transistors.
IHS iSuppli believes that infrastructure challenges will slow or suspend shipments from Japan during the next two weeks. However, the global supply chain has about two weeks of excess component inventory in the pipeline for semiconductor parts affected by the quake.
Because of this, the shortages are not likely to appear until the end of March or the start of April – although shortages and their price impact are likely to linger until the third quarter.
“While actual shortages haven’t occurred yet, the disaster is already affecting component pricing, due to the psychological impact of the disaster,” Ford writes. “Pricing for higher-density NAND flash already has climbed by as much as 10% on the spot market, which buyers use to procure relatively small quantities of parts.”
Most of Japan’s largest electronic component producers operate their manufacturing facilities far to the south of the epicentre of the quake and the areas most impacted by the tsunami, so actual damage was negligible. However, companies are facing problems shipping components, receiving raw materials and getting workers to their facilities. Power interruptions also are slowing production, and can be a major impact on the operations of manufacturing facilities.