Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now


Japan Quake Affects AV Manufacturing

While it may seem parochial if not insensitive to enquire about the state of the electronics industry in Japan while millions of people in that country deal with crises beyond our imagining, business going forward is the best possible scenario. I vividly remember the day after 9/11, when I sent out hundreds of persona

While it may seem parochial if not insensitive to enquire about the state of the electronics industry in Japan while millions of people in that country deal with crises beyond our imagining, business going forward is the best possible scenario. I vividly remember the day after 9/11, when I sent out hundreds of personal emails to the industry, saying that our publishing HQ offices in NYC were fine, and that we were hard at work — the best tonic for a difficult time.

A leveled Fujitsuka, Japan. Source: Google, Digitalglobe

It’s easy to get sucked into the CNN style coverage and think the sky is falling. Japan is a formidable economy with one of the word’s most educated and highly trained populations. The Japanese treasury is holding foreign reserves of U.S. $1 trillion. Their own currency is the strongest in the world, their personal savings rate is among the world’s highest, and their current account is in perennial surplus — the result of both the savings infrastructure and their balance of trade. This morning, the Central Bank of Japan injected the equivalent of $U.S. 180 billion into the banking system to aid liquidity, and there’s plenty more where that came from. It will take more — much more — than this to knock Japan down. And even as the infrastructure crises are dealt with day-to-day in Japan, the formidable electronics, video, and CE industry will forge ahead. It’s doing so, today.

As bad as the headlines seem on any given day, recent research by the Inter American Development Bank shows only the biggest disasters — larger than this one — have a long term impact. (View the report at: Inter American Bank Report) The study showed that natural disasters do not have any significant long-term effect on subsequent economic growth of the studied country. According to the report, “The only two cases where we found that truly large natural disasters were followed by an important decline in GDP per capita were cases where the natural disaster was followed by radical political revolution, which severely affected the institutional organization of society.”

In that sense, there is more threat to the long-term stability of major industrial sectors from the current political instability in the Middle East than there is from the natural disaster-induced crises in Japan. In the short term, there will be disruptions to the Japanese supply chain for our industry. They won’t be across the board. Because it depends on whether you’re talking about the chip-level supply chain, or the finished product chain, or in between.

Late Sunday, the Japanese government asked major companies to reduce electricity consumption. Some responded by temporarily closing factories. In an eerie sign of the extent of the precautions, almost all of the large-format digital signage, including the LED billboards in Japans major cities, was turned off.

Perhaps not surprisingly, Japan’s Internet infrastructure has held up remarkably well. According to the Internet performance monitoring company Renesys, Internet traffic to and from Japan dropped by about 25 gigabits per second in the immediate aftermath of the earthquake, but returned to normal levels only a few hours later. Traffic at Japan’s JPNAP Layer 2 Internet exchange service appears to have slowed by just 10 percent since Friday, according to Renesys.

The electronics industry is based on semiconductors, of course, and Japan’s chip factories are at the center of the worldwide industry. Approximately 20 percent of all semiconductors and roughly 40 percent of all flash memory chips used in cell phones, smartphones, PC’s, and tablets are made in Japan. As much as China, Indonesia, and other Asian countries have opened chip factories, Japan still reigns when it comes to the manufacturing of the more sophisticated chips, whether for iPhones or for DLP projectors. Putting a hundred million micro-mirrors on a chip the size of a postage stamp (as with Texas Instruments’ DLP chips) is not something you can farm out anywhere.

A look at revealed yesterday that the price of NAND flash chips has risen sharply: 32Gbit devices were up 17.36 percent and 16Gb devices up 17 percent. Analysts have attributed much of this spike to a ‘brief interruption’ that Toshiba said occurred in its NAND production complex at Yokkaichi, immediately following the earthquake (that is, by the way, about 600 miles away from the epicenter). Toshiba’s NAND Flash memory chips are used in the iPhone, iPad and a string of other tablets. But yesterday, Toshiba — one of the largest Japanese exporter of computer chips — said that it would heed Tokyo Electric Power Company’s call to cut electricity consumption in Japan by cutting back to only essential services. On Monday Toshiba closed all of its factories in areas with power outages, aside from its headquarters and critical business offices. But early today Toshiba’s fabrication base for NAND flash memories, Yokkaichi Operations, was already back in operation, the company said.

According to a variety of wire sources, NEC factories in both the Iwate and Fukushima prefectures have been closed because of electricity and water supply problems. Fujitsu announced on Monday that it shut down 10 plants. Hitachi has closed down six factories. Canon has closed eight factories, and Nikon has closed four facilities.

Through its U.S. operation, Sharp issued a statement expressing “deepest sympathy to all the people affected by this earthquake. There are no extensive damages to our buildings or production facilities in Japan including our plant located in Yaita-city, Tochigi prefecture.” Its LCD panel production facilities located in Sakai-city, Kameyama-city, Taki-cho and Tenri-city are operating normally.

Panasonic told NewBay Media reporters at TWICE magazine that there were minor injuries to the employees in its AVC Networks Company Fukushima factory (manufacturing digital cameras); AVC Networks Company Sendai factory (manufacturing optical pickups); Panasonic Electric Works Koriyama factory (manufacturing electronic materials); and Sanyo Electric Gunma factory (manufacturing washer/dryers, etc.). Panasonic said in a statement that fires or major damage to facilities have not been reported and that “we are suspending operations in the factory affected by the earthquake and continuing to evaluate further details of the damage.”

Panasonic announced on the 12th that the company has committed 300 million yen monetary contributions and in-kind donations of 10,000 units each of radios and flashlights and 500,000 dry batteries to aid victims and support the recovery of areas affected.

Late Monday, Texas Instruments warned of lost revenue from two of its semiconductor plants in Japan. The Dallas-based chip maker, that will supply the dual-core processor for Research In Motion’s new PlayBook Tablet, reported that damage from the quake as well as the subsequent Japanese government-led electricity rationing will prevent the restarting of the factories in the near term.

Shortly after the earthquake, Epson established a Disaster Headquarters headed by President Minoru Usui at its head office in Suwa, Nagano Prefecture. As a result of the earthquake, Epson suffered damage to its Sakata Plant and also to Group companies in the Tohoku areas. Major Epson facilities affected:
• Epson Atmix Corporation (Hachinohe, Aomori Prefecture). Operations have been suspended as the plant was subjected to a tsunami of approximately one meter. As yet the company does not know when operations will resume.
• Akita Epson Corporation (Yuzawa, Akita Prefecture). Operations have been suspended due to a power cut caused by the earthquake. Damage to the buildings and production facilities were minimal. While carefully confirming plant safety and electricity power supply, Epson resumed operations from March 14.
• Seiko Epson Corporation Sakata Plant and Tohoku Epson Corporation (Sakata, Yamagata Prefecture). Operations have been suspended due to a power cut caused by the earthquake. Although there was no damage to the buildings, Epson is still confirming the state of the production facilities. The company does not yet know when operations will resume.
• Epson Toyocom Corporation Fukushima Plant (Minami-Soma, Fukushima Prefecture). Operations have been suspended due to the earthquake, and both buildings and production facilities appear to have sustained damage. Epson has temporarily terminated operations as the plant is approximately 10 miles from the Tokyo Electric Power Company’s Fukushima No. 1 nuclear power station, and therefore within the evacuation area. The company does not yet know when operations will be resumed.

Epson today announced it has cancelled the Color Imaging Exhibition 2011 as a result of the earthquake that struck the Tohoku area of Japan on March 11. The event was scheduled to be held in Tokyo from March 19-21.

Texas Instruments said its plant in Miho (40 miles northwest of Tokyo) that makes analog chips and DLP chips for digital video projectors, had been closed, but would return to production in several stages from May to July of this year. The Miho plant was responsible for 10 percent of Texas Instruments’ output last year. But TI also reported Monday that it had already found alternative manufacturing capacity for 60 percent of the Miho plant’s production.

Tak Nakata, president of Yamaha Corporation of America, currently in Hamamatsu, Japan, yesterday issued the following statement: “On behalf of Yamaha, I wish to thank our business partners in the United States for their thoughts and prayers in response to the earthquake that impacted Japan and the Pacific basin.

“As far as we know, no Yamaha employees have been injured as a result of this disaster,” Nakata told NewBay Media’s TWICE magazine. “Also, there has been no significant damage to our offices or factories. It is still too early to determine if this ongoing situation will affect shipments due to the currently unknown impact on ports, vessels and shipping lanes. We will provide additional information just as soon as it is made available to Yamaha.”

Sony has responded to reports of widespread power outages by voluntarily suspending operations at several sites. Sony said that no significant injuries have been reported to employees working at any of these sites when the earthquake or tsunami occurred.

The company said Monday that it was “currently evaluating the full impact of the earthquake, tsunami and related power outages on Sony’s businesses and consolidated financial results.”

As of 11:00 a.m. local time in Tokyo, March 14, manufacturing operations had been suspended at the following Sony facilities:
• Sony Chemical & Information Device Corporation,
• Tagajyo Plant (Miyagi Prefecture) (Magnetic Tapes, Blu-ray Discs etc.)
• Tome Plant, Nakada/Toyosato Sites (Miyagi Prefecture) (Optical devices, IC cards etc.)
• Sony Shiroishi Semiconductor Inc. (Miyagi Prefecture) (Semiconductor Lasers etc.
• Sony Energy Devices Corporation, Koriyama Plant (Fukushima Prefecture) (Lithium Ion Secondary Batteries etc.)
• Sony Energy Devices Corporation, Motomiya Plant (Fukushima Prefecture) (Lithium Ion Secondary Batteries etc.)
• Sony Manufacturing Systems Corporation, Kuki Plant (Saitama Prefecture) (Surface mounting equipment etc.)
• Sony DADC Japan Inc., Ibaraki Facility (Ibaraki Prefecture) (CDs, DVDs etc.)

In addition to these manufacturing sites, Sony reported Monday that its Sendai Technology Center (Tagajyo, Miyagi) has ceased operation due to earthquake damage.

In related news, Sony announced on Monday that it will donate 300 million Japanese yen to help relief and recovery efforts in communities affected. Additionally, a disaster relief fund will collect donations across the Sony Group from employees worldwide, and their contributions will be matched by the company through a matching gifts program. The company will also donate 30,000 Sony portable radios to assist the relief of earthquake victims, while the Sony Group will prepare further product donations going forward, taking into account the local needs.

Sony will resume operations at two factories on March 15 in Saitama and Tochigi prefectures, Bloomberg News reported late Monday.

“In times like these, we are reminded of how important and fragile we are and of the positive impact we can have — both as individuals and, collectively, as a Company — to assist those in need,” said Howard Stringer, chairman, CEO and president, Sony Corporation. “We will continue to make the utmost effort to help the swift recovery of the affected communities in the region.”

Commenting on the effect of the earthquake and subsequent events on the LCD panel manufacturing sector in Japan, yesterday David Hsieh, vice president, greater China market, DisplaySearch, issued an email blast saying that “Some TFT LCD factories located in the impacted area, including Hitachi Display (Chiba prefecture), NEC’s Gen 2 (Akita prefecture), Toshiba’s Fukaya and Ishikawa factories, as well as Epson’s Gen 2, were reportedly not damaged by the earthquake. But it is very likely that these factories have paused production to gauge the impact and calibrate the facilities. These factories are all focused on small/medium panels, and their share in the industry is very minor. We are assuming that there will be no major impact to the TFT LCD industry as a result.”

It is not known, however, how much this might change if electricity supply disruptions are magnified in coming days.

“The majority of the TFT LCD industry is not located in the area most heavily impacted by the earthquake,” Hsieh said. “Sharp’s Gen 8 and Gen 10, Panasonic LCD’s Gen 8, and NEG’s glass tanks are all located in the Kansai area, which does not appear to have been affected by the earthquake. Key LCD component makers, like Nitto Denko, DNP, Sumitomo, Toppan, and Corning, have located most of their facilities in west Japan. These LCD and components clusters do not appear to have been affected.”

When the damage has been repaired — when the Japanese plants that produce not just the chips that power the worlds’ great products, but great finished products as well — are back up full-speed, we’ll all breathe a sigh of relief. Because the Japanese electronics industry is the economic backbone and the pride of a great country, that stands alongside this one, in a perennial striving toward excellence in design, process, and go-to-market execution. Godspeed to our Japanese colleagues in the commercial AV, projection, flat panel display, digital signage, semiconductor, cellphone, and smartphone industries, as they bounce back quickly, and come back even stronger than before.