Earthquake in Japan jolts global supply chain

This aerial view taken on March 14, 2011 during an AFP-chartered flight shows an industrial area damaged by the tsunami in Sendai in Miyagi prefecture three days after a massive 8.9 magnitude earthquake and tsunami devastated the coast of eastern Japan.

Kai Ryssdal: Rob was talking supply chains in the domestic context, getting food and fuel from one place to another within Japan. But if you were to take apart your smartphone or your new iPad 2 or your big screen TV, you'll find things -- many things -- that were made in Japan.

Japanese factories supply a big chunk of the world with memory chips, silicon wafers and semi-conductors. Today, the economic effects of Friday's earthquake are starting to be felt in markets and on manufacturing floors.

Marketplace's Steve Henn reports.


Steve Henn: Japan is a huge player in the global semi-conductor market. The country makes roughly 60 percent of all the silicon wafers that are used in semi-conductors around the world.

Immediately after the quake on Friday, semi-conductor plants more than 500 miles away from the epicenter shut their operations. That's like a quake in Richmond, Va., knocking out factories north of Boston, or one in San Diego shuttering factories in the suburbs of San Francisco.

Jim Hardy: It's not necessarily just what's been damaged, but it's what has had to be been shut down because there is a question about whether or not there is a problem.

Jim Hardy follows the semi-conductor market for the firm Objective Analysis. He estimates about a dozen semi-conductor plants have been knocked out of production, at least temporarily.

If that were the end of the story, Dean Freeman, a semi-conductor analyst at Gartner, wouldn't be that concerned.

Dean Freeman: A bigger issue for Japan is the overall power situation. Right now they are shutting off power for eight hours a day, so that means semi-conductor plants going to have to figure out how have to work around the power outages.

Fabricating chips is a precise, energy intensive business.

Freeman: If you are in the middle of a process at 1200 degrees C, and you have to shut the power down before you are done, there is going to be an impact.

If events in Japan keep silicon wafer factories or semi-conductor plants offline for more than a week or two, it could cause chip shortages around the world. Manufactures of everything from automobiles to iPads might have to wait or simply pay more to get the semi-conductors they need. And Hardy's predicting big price spikes.

In Silicon Valley, I'm Steve Henn for Marketplace.

About the author

Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011.

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