Japan Earthquake Could Deal Blow to Semiconductor Industry

With much of the semiconductor manufacturing in Japan and other Asian countries, the earthquake and tsunamis that hit Japan could have a significant impact on the tech industry.

The massive earthquake and tsunamis that tore through Japan March 11 and rippled throughout the Pacific region could have significant near-term effects on the semiconductor industry, according to analysts.

Japan and Taiwan make up a huge amount of the global semiconductor manufacturing, and even the smallest amount of downtime could have a large impact on chip supply and prices, the analysts said in various reports.

The 8.9-magnitude earthquake, which the Japan Meteorological Agency called the largest in Japan's history, struck the region midafternoon local time March 11. The massive earthquake set off a series of aftershocks, some as high as 6.6, and tsunamis that slammed into the island nation and rolled out as far as the West Coast of the United States.

Damage assessments were still coming in midafternoon EST, and tech companies reportedly were scrambling to determine the damage to their operations in the region.

More than 40 percent of the NAND flash memory chips and about 15 percent of the global DRAM supplies are made in Japan, which also is a key source of chips that support such booming consumer electronics devices as smartphones, tablets and PCs, Jim Handy, an analyst with semiconductor market research firm Objective Analysis, said in a March 11 report.

"A two-week shutdown would remove from production a sizable share of each of these," Handy wrote. "It doesn't take a large production decrease to cause prices to increase dramatically. Objective Analysis anticipates phenomenal price swings and large near-term shortages as a result of this earthquake."

The supply side of the business will not be the only one to take a hit, he said.

"Demand will be impacted as well since many electronics manufacturers are in Japan, and their consumption of semiconductors will be halted until earthquake damage is repaired," Handy said.

Analysts with IHS iSuppli said the major impact of the disaster will be not in semiconductor production, but to the supply chain.

"Suppliers are likely to encounter difficulties in getting raw materials supplied and distributed and shipping products out," IHS iSuppli said in a March 11 research note. "This is likely to cause some disruption in semiconductor supplies from Japan during the next two weeks, based on the IHS iSuppli preliminary assessment of the situation."