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Japanese quake will lead to component price hikes

Simon Quicke

Component prices are set to rise as a direct consequence of the Japanese earthquake, which has closed factories and led to power supply problems undermining other manufacturing efforts.

The extent of the devestation of last weeks earthquake is still being discovered but over the weekend to add to the problems caused by the tsunami the nuclear power plants responsible for 20% of the country's power were hit by problems.

This has led to power outages across the country and those factories not directly hit by the waves and the quake are now subject to electricity supply issues.

Analyst firm iSuppli has issued a warnbing that the disruption to the component supply chain could last for weeks as a consequence of the Japanese earthquake.



"The major impact on Japan's semiconductor production is not likely to be direct damage to production facilities, but disruption to the supply chain. Suppliers are likely to encounter difficulties in getting raw materials supplied and distributed and shipping products out. This is likely to cause some disruption in semiconductor supplies from Japan during the next two weeks," stated iSuppli.

In comments made to MicroScope's sister magazine Computer Weekly, Andrew Buss, services director at Freeform Dynamics expects component prices to increase.

He said manufacturers may also face shortages of key components and companies attempting too bring new products to market may struggle to source components.

In expectation of component shortages the cost of memory increased  this morning, accordinng to figures on the DRAMeXchange.

It noted that the price of a DDR 3 1-gigabit dynamic random- access memory chip rose by 7% and 4-gigabit NAND flash-memory chip climbed by 17%.

Enguerran Ripert, nuclear expert at Frost & Sullivan, said that the impact of power problems was more serious than the fears around a nuclear meltdown.

"Rather than an imminent meltdown, it is the cost of repairs, and the indirect cost of a dramatic loss of power supply which Japan and the rest of the world will suffer the consequences of," he said.

"Currently, major companies such as Toyota, Sony, Matsuchita and Nissan amongst many others, have had to halt their production for a lack of available electricity," he added.

Ever since the scale of the disaster became clear last Friday there have been warnings that the component supply chain was going to be hit by the earthquake.

Last Friday, analysts had started to make some early predictions, which have sinced been echoed by many others, that the epicentre of the quake hit one of the main areas for component manufacturing in Northern Japan and the consequences would be felt in shortages and price.


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