Japan Disasters Will Not Hurt Chip Production

Officials with both Intel and Qualcomm say they will have no problems getting products out to customers, despite concerns about supply chain issues for many chip makers due to the ongoing troubles in Japan.

Both companies said that their operations are spread out enough geographically that a disaster like the one that has struck Japan will not impact their operations too greatly.

Cushioning The Blow

In a statement to Bloomberg News, Chuck Molloy, a spokesman for Intel, said the chip giant will be able to continue manufacturing and distributing its processors. Intel supplies more than 80 percent of the world’s computer chips.

“We will keep our commitment to our customers,” Molloy told Bloomberg. “Our general rule is that nothing is sole-sourced.”

For its part, Qualcomm released a statement saying that, like Intel, it has operations around the globe so that a problem in one region will not negatively impact the company’s entire business.

“Based on a review of our extended semiconductor supply chain, we do not foresee any significant impact in our ability to supply product to our customers due to the events in Japan,” Qualcomm, the leading chip maker for mobile devices such as smartphones, said in its statement. “Qualcomm has multiple, geographically diverse sources for supply as well as production processes specifically designed to enable us to mitigate disruptions in our supply chain.”

In the statement, Qualcomm also noted the question of availability of BT (Bismaleimide Triazine) resin, which the company uses along with epoxy-based laminates in chipset packages.

“To account for any potential disruption in BT supply, we believe our use of buffer stock and adjustments to our near term material mix will enable us to mitigate potential supply disruptions to our customer base,” the company said.

Japan has been under siege since the 9.0-magnitude earthquake and resulting tsunami hit the island nation March 11. In addition, the country also has had to deal with the damage to some of its nuclear power facilities and the threat of radiation getting into the atmosphere.

Analysts have pointed out that Japan, along with Taiwan, supply a large amount of the world’s semiconductors and other computer components, such as NAND flash memory and DRAM parts. While actual damage to facilities in Japan initially appears to be minimal, the analysts have said supply chain problems and other issues – such as rolling power outages – could hinder the manufacturing and shipping of such components. They also warned of price increases.

“While there are few reports of actual damage at electronic production facilities, impacts on the transportation and power infrastructure will result in disruptions of supply, resulting in the short supply and rising prices,” analysts with IHS iSuppli said in a report March 14. “Components impacted will include NAND flash memory, dynamic random access memory (DRAM), microcontrollers, standard logic, liquid-crystal display (LCD) panels, and LCD parts and materials.”

Jim Handy, an analyst with market research firm Objective Analysis, said in a March 11 report that given the size of the computer component industry in Japan – more than 40 percent of the NAND flash memory chips and about 15 percent of the global DRAM supplies are made in the country, he said – any blip in the manufacturing schedule could have a ripple effect throughout the tech industry.

“A two-week shutdown would remove from production a sizable share of each of these,” Handy wrote. “It doesn’t take a large production decrease to cause prices to increase dramatically. Objective Analysis anticipates phenomenal price swings and large near-term shortages as a result of this earthquake.”