The recent earthquake and resulting tsunami impacting Japan have wreaked havoc on the island nation. Furthermore with the imposing threat of nuclear disaster, all eyes are focused on Japan. Imperial Electronic Assembly works closely with customers to navigate this critical time.
Japan represents 10% to 15% of global electronics demand but 16% to 30% of electronics component supply. OEMs with meaningful cash positions are trying to pull in orders, buying up available component supplies.
Japan electronics sector / industry
Japan is a strong supplier of upstream components and materials in the electronics supply chain.
One report from Credit Suisse states the firm expects supply issues impacting the electronics supply chain will last one to three months with the greatest risks being felt in the supply of bismaleimide-triazine (BT) resin which is used for making substrates to attach electronics chips (used in smartphones / handsets) to printed circuit boards; silicon substrate, display glass (TVs, monitors...), semiconductor equipment and aluminum HD substrates.
Untold risks that could further impact the report's findings include the degree of threat from the nuclear situation in Japan, impact of rolling power issues, impact of water issues, and transportation and logistics issues.
Global electronics demand v. supply
In looking at the global electronics supply chain where overall demand is concerned, Citigroup estimates Japan accounts for, approximately:
9% of worldwide GDP
14% of worldwide electronics production
11% of worldwide semiconductor demand
3% of worldwide handset demand
5% of worldwide PC demand
Meanwhile, Japanese supplies to the worldwide electronics industry amount to:
50% of the supply of semiconductor silicon substrate
21% of front-end CMOS semiconductor supply
16% of back-end semiconductor supply
35% of total LCD glass production
56% of total MLCSS production
85% of BT resin production
Looking closer at wafers, a separate more detailed report from Credit Suisse discusses Japanese wafer firms Sumco and Shin-Etsu Chemical.
Sumco owns approximately 35% global market share in 300mm wafers, which account for about 80% of operating profits (FY3/11E basis). The 300mm wafer market is becoming increasingly oligopolistic, with Sumco and Shin-Etsu (the top two companies) holding a combined 65% global share.
Sumco has completed construction of new facilities (production capacity of 300,000 to 400,000 wafers / month) in anticipation of expanding demand, but these have yet to become operational.
Shin-Etsu Chemical is also a major global manufacturer of 300mm wafers used in semiconductor production (estimated 30% share).
Taiwan component sector / issues amid Japan disruption
An alternate report by investment bank Credit Suisse indicates the firm believes the printed circuit board IC substrates market (mainly BT) could likely see bigger negative impacts.
Printed circuit boards
Among Taiwan PCB companies the bank covers, Credit Suisse believes that BT-based substrate companies such as Kinsus and Unimicron may see bigger negative impacts, as the key material is mainly supplied from Japan with potential production outage currently at Mitsubishi Gas Chemical.
Meanwhile, the impact on flexible printed circuit boards (FPCB) is mainly due to production outage from JX Nippon (Japan), which accounts for 75% of the global output for RA foil.
However, the bank believes this can be partially offset by second sourcing such as Furukawa Copper Foil Taiwan, Taiwan Copper Foil and Olimbrass (US).
The impact on rigid printed circuit board production should be relatively limited if there is no disruption for end-product demand. This is because the majority of the raw materials for PCBs have been supplied by non-Japanese companies.
Optical lens
The impact on optical lens sensor components is limited, as Omnivision is now the biggest optical sensor supplier globally. High-end producer Kantatsu (Japan), has one factory located in Fukushima that has been impacted by the earthquake.
Passive components
Murata has two factories (Sendai and Tome) impacted by the earthquake. Based on Credit Suisse Japan analyst, Akinori Kanemoto, Murata's Sendai factory makes SAW duplexer and SAW filters, and Tome is produces RF inductors. The investment bank believes no alternative Taiwan company is capable of producing these three products for handsets with large volume at the current stage.
Crystals
The global number one crystal oscillator maker, Japan-based Epson Toyocom, announced its operations had shutdown following the earthquake.
According to Bloomberg, Shin-Etsu Chemical may be one of the companies hurt the most by the earthquake in Japan. However, the factory Shin-Etsu Chemical has stopped operation mainly to make silicon wafer, instead of silicone rubber (the key raw material for keypads).
Japanese companies producing indispensable materials and products
Regarding infrastructure and the supply chain, a press release by IHS iSuppli released last week indicates the research firm anticipates the global electronics supply chain has about two weeks of excess component inventory in the pipeline for semiconductor parts affected by the earthquake.
Based on this forecast, IHS iSuppli feels any shortages won't begin to appear until the end of March / beginning of April time frame.
Expect impact to be inconsistent among manufacturers
Credit Suisse contacts are telling the bank that some OEMs (especially private companies with meaningful cash positions) are trying to pull in orders (buying up available component supply). The industry can likely expect this to cause inconsistent results among manufacturers in Q1 - Q3, with some companies exceeding and others missing expectations.
Japanese companies producing indispensable materials and products
Another report by Credit Suisse speaking to Japanese products including autos, semiconductors, and LCD TVs highlights where the Ministry of Economy, Trade and Industry (METI) provides data on global market shares of Japanese companies for various end products and components.
According to this white paper, total sales and global market share for end products of Japanese companies are as follows:
automobiles ¥54tn, 32%
electronic equipment ¥25tn, 22%
LCD TVs ¥3tn 44%
digital cameras ¥1.8tn, 75%
multifunction printers / copiers (MFP/MFC) ¥730bn, 69%
Additionally, total sales and global market share for Japanese companies in components and materials are:
wire harnesses ¥2.2tn, 58%
continuously variable transmissions (CVT) for autos ¥400.7bn, 92%
electronic components ¥9.4tn, 43%
display devices ¥2.9tn, 25%
polarizers ¥473bn, 64%
protective polarizer film for LCDs ¥283.7bn 100%
overall semiconductors ¥6.4tn, 22%
silicon wafers ¥845.8bn, 72%
lithium-ion batteries for mobile phones ¥159.9bn, 46%
electrode materials for lithium-ion batteries ¥137.8bn, 78%
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