Sony Ericsson Considers Options as the Japanese Quake, Tsunami Disrupts Supply Chain

Sony Ericsson (News - Alert) announced that the massive earthquake and tsunami that hit Japan would likely “disrupt” its supply chain, Reuters reported.

The mobile phone maker added it was considering options to get around the impact. "Although the full impact of the current situation on our business will take additional time to assess, Sony Ericsson anticipates disruption to its supply chain operations," the company said in a statement covered by Reuters (News - Alert). "As part of our business continuity plan, we are in contact with all our key suppliers in the region and we are identifying the possible relocation of certain component manufacturing, and looking at secondary sources of supply."

They are not alone.

In his analysis of the situation, 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 Semiconductor (16 percent), Analog Devices (News - Alert) (14 percent), and Linear Technology (14 percent).”

TMCnet reports a similar grim analysis 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.