Texas Instruments Japanese Plant Saw 'Substantial Damage', Chip Sector to See Price Increases

Several corporations have been directly impacted by the massive earthquake in Japan – with the chip sector, such as Texas Instruments (News - Alert), especially hurt from the destruction.

In addition, stock exchanges have seen an economic impact from the quake. The Wall Street Journal reports that “chip stocks are getting hit again.” In a blog post on Tuesday, the newspaper noted that Intel (News - Alert) decreased 3.5 percent, AMD decreased about 2.7 percent, and Texas Instruments decreased 2 percent.

Texas Instruments may lose revenue in the first half of the fiscal year with the earthquake causing “substantial damage” at its Miho, Japan, manufacturing plant, The Journal reported.

In his analysis, J.P. Morgan chip analyst Chris Danely said,

“We expect many semiconductor companies in our coverage universe to … be negatively impacted from both a demand as well as a manufacturing perspective. We believe ON, Maxim, Xilinx (News - Alert), and TI all rely on Japan for some part of manufacturing … We also expect a negative impact from demand and potentially shipment disruptions in Japan, which is one of the largest consumers of electronics. Companies in our universe with high exposure to Japan include Altera (18 percent of sales from Japan), ON (News - Alert) Semiconductor (16 percent), Analog Devices (14 percent), and Linear Technology (14 percent).”

A similar grim report comes from The Stock Market Watch, which reports the “hardest hit” sector is likely “the chip industry” which is “causing global fears of price increase and shortages of major components.”

The website also notes that Japan “is one of the major suppliers of flash memory chips to major industries the world over.”

Even relatively minor damage to manufacturing plants and loss of expensive fab machines may cause reduced output of chips, according to The Stock Market Watch.

“Those manufacturing units that haven’t been faced with any damages from the earthquake are set to be affected by other problems such as electricity, transportation of raw materials and finished goods and employee availability. Transportation means such as roads, rail, air and sea have suffered damage and need to be repaired and restarted. This could lead to potentially affecting the global supply of important parts in electronics,” the report added.

The prices of chips from Japan are expected to increase in coming days, according to analysts cited in the report.