Japan’s catastrophe may mean severe semiconductor shortage

Analysts have told SCMR that auto plants in the U.S. 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
By Patrick Burnson, Executive Editor
March 24, 2011 - SCMR Editorial

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.

Analysts have told SCMR that auto plants in the U.S. 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 located 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 while 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,” said Iain Bowles, of Probrand, a major supplier of top branded computer products based in Birmingham England.

“South Korean and Taiwanese semiconductor manufacturers have confirmed they are unsure how long existing inventories of materials will last or how logistics, power or staffing disruptions will impact supplies,” he added.

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 semiconductor and therefore the end-user product,” said Bowles. “This is the cleft stick in the middle of the IT supply chain.  Redesign is both time and money sensitive.”

Bowles agreed with other analysts who maintained that the full impact of this disaster has yet to be measured.

“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,” he said.  “Additional nuances like unique chemical supply are adding to the complexity of Japan’s supply chain challenges.”

Brittain Ladd, a supply chain consultant and lecturer, told SCMR that it is not too late to act, however.

“I have been inundated with calls from companies asking me what they can do immediately since their supply chain has been disrupted,” he said.

He added that software forecasting and contingency planning packages are being made available, and that it is not too late to act.

“We are also reinforcing the importance of ensuring their is alignment throughout the supply chain so that when a disaster strikes, corporations are able to respond,” he said.

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About the Author

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Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

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About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

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