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March 31, 2011

Japan's Disasters Leading to Higher Priced Electronics

Despite contingency plans, concerns surrounding the recent disasters in Japan rely on the fact that Japan is responsible for one-fifth of the world’s semiconductor production—the reason the earthquake and tsunami has threatened supply manufacturers worldwide. Now analysts are expecting the prices of consumer electronics to rise significantly.

Reuters recently reported that companies such as Ericsson, Alcatel-Lucent (News - Alert) and STMicroelectronics have sent warnings for supply impact, going down the same road of worry as the auto industry, as Japan is a major supply source for the auto and technology industries.

Japan produces between 15 percent and 20 percent of the world's electronics and "plays a particularly key role in some areas," said Jean-Philippe Dauvin of Paris-based consulting company Decision, according to AFP.

Dauvin also noted that 40 to 50 of Japan’s 140 semiconductor factories have been shut down which will lead to disruptions in the supply chain globally, which, in turn, will lead to higher prices for us consumers.

"There's about 100 euros ($141) worth of semiconductors in a smartphone," Dauvin said. "There's sure to be memory and Japanese components in there."

What we’re expected to see, essentially, is a ripple effect in the market.

Not every analyst agrees, however. There seems to be some conflicting information in regards to what the experts are predicting for the consumer electronic market in regards to consumer pricing.

Contrary to what Dauvin is saying, semiconductor analyst Jim Handy doesn’t think that the ripple effect will extend to the consumer.

“Typically when this kind of a thing happens or when there is any kind of a jump in semiconductor prices, that jump is not passed on to the consumer," said Handy, as reported by CNET.

Because consumer electronics are “discretionary purchases,” consumers will simply wait it out in terms of high prices. Unlike gasoline, consumers can do without.

Like Handy, Richard Gordon, research vice president at Gartner (News - Alert), said he was “cautiously optimistic” that Japan's disasters wouldn’t have such a negative impact on the global supply chain for electronics.

"Early on, when the earthquake just happened, there was lot of concern that there would be an immediate impact and that it would be quite significant on the global level in terms of a disruption to the electronics supply chain," he said. 
Michelle Amodio is a TMCnet contributor. She has helped promote companies and groups in all industries, from technology to banking to professional roller derby. She holds a bachelor's degree in Writing from Endicott College and currently works in marketing, journalism, and public relations as a freelancer.

Edited by Janice McDuffee
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