Electronic goods in China face price rise

PUBLISHED : Wednesday, 16 March, 2011, 12:00am
UPDATED : Wednesday, 16 March, 2011, 12:00am

With Japanese suppliers overwhelmed by the damage to the transport and power infrastructure caused by last week's earthquake, a shortage of key electronic components and higher prices for these devices now loom for China's manufacturers.

Components that are affected by Japan's worst disaster since the second world war include a range of chips, such as the NAND flash memory used in devices like smartphones and digital cameras, and dynamic random access memory (DRAM) used in personal computers. Also impacted are the parts and materials used in liquid-crystal displays (LCDs), key to flat-panel televisions and computer monitors.

'While actual shortages haven't occurred yet, the disaster is already affecting component pricing, due to the psychological impact of the disaster,' Dale Ford, a vice-president at market intelligence firm IHS iSuppli, said in a report.

Pricing for higher-density NAND flash, for example, climbed by as much as 20 per cent on Monday on the spot market, which buyers use to purchase relatively small quantities of parts.

Japanese suppliers accounted for more than one-fifth of global semiconductor production last year. Japan last year also accounted for 6.2 per cent of the world's US$86.3 billion in global production of large LCD panels - 10 inches or more when measured diagonally across the screen.

Ford said production at Panasonic's sixth-generation LCD fabrication plant in Japan, 'which produces LCD TV panels used in the company's televisions and those of Chinese brands', was affected since the plant was near the earthquake's peripheral zone.

A research note by HSBC analysts in Hong Kong said: 'While the impact remains unclear, our industry contacts in the hardware sector are most worried about the supply in three spaces: passive, memory and battery.' It said: 'There is a risk of demand disruption for tech products.'

Sony, for example, halted output of batteries used in laptop computers over the weekend. It accounts for about 16 per cent of battery cell and battery packs produced worldwide.

According to HSBC analysts, the supply chain disruption in Japan may cause manufacturers' orders of components to switch to rival suppliers in Taiwan and South Korea.

While most of Japan's largest electronic component producers operate far to the south of the epicenter of the earthquake and the areas hit by the tsunami, they face lingering problems in shipping components, receiving raw materials, getting workers to their plants and power interruptions, Ford said.

A spokeswoman for Singapore-based Flextronics International, the world's second largest electronics manufacturing services provider, said yesterday that the company 'has just started to assess the impact to its production on the mainland'.

Flextronics, which has more than 90,000 employees in China, has about 18 manufacturing sites in seven domestic locations.

According to IHS iSuppli, more than 75 per cent of the growth in the contract electronics manufacturing industry last year was contributed by production on the mainland. The sector's revenue is forecast to reach US$376.7 billion this year from US$347.3 billion last year.

Mainland technology giant Lenovo Group, the world's fourth-largest supplier of personal computers and the leading domestic brand of mobile-phone makers, said it was also studying the component supply situation.