After Japan Earthquake, Tech Shortages and Higher Prices Possible

/ Source: TechNewsDaily

Experts believe that the electronics industry may suffer shortages and price jumps this year amid tech-production uncertainties in parts of Japan that were affected by the magnitude 9.0 earthquake and tsunami that hit the region last week.

Japan is a key producer of certain electronics components, from chips and wires to other parts that make up devices, and there is no sector of the industry that won't be somewhat affected by the crisis overseas. As manufacturers elect to voluntarily close plants for a period of time and cut shifts in production, there’s a good chance that supply-and-demand issues will surface in the upcoming months.

"It's still very early to predict [how] the tragedy in Japan will impact the global market, but it’s fair to say we will likely start to see some shortages in the marketplace as soon as the next 90 days," Jeff Orr of ABI Research told TechNewsDaily. "This means that devices could be in limited supply and the price may go up slightly."

Power outages due to the nuclear power plant shutdowns as well as transportation issues are also preventing some companies from coming back to full production. However, the good news is that most device manufacturers have second-source manufacturers in case of outages, limitations or constraints on certain markets.

"You can't predict a natural disaster, but you can plan for situations that might allow other manufacturers to can step in and pick up the volume elsewhere, whether that’s in other regions or different countries altogether," Orr said. "This has already started to happen in China, Taiwan and other parts of Southeast Asia."

Tech eggs not all in one basket

The electronics industry supply chain is widely spread throughout Asia, and although there are some specific components, materials and equipment that are supplied by Japanese firms, the larger companies have production locations in other Asian countries to support high volume manufacturing.

With northeast Japan at a standstill right now, companies will continue to lean on development facilities in other countries. Paul Semenza, senior vice president of market research firm DisplaySearch, said that this will give these counties the ability to gain market share, at least temporarily.

"Brands can be nimble when it comes to working with other suppliers. Component manufacturers can look into licensing their technology or partnering with companies that have similar manufacturing capabilities elsewhere, so the tech world won’t take too much of a hit," Semenza said. "The longer term affect could be a loss of competitiveness on the part of Japanese firms, as other Asian firms build their own supply chains."

U.S. impact

Although experts don’t believe that the consumer electronics industry will be largely impacted in the U.S. by these developments, there may indeed be some ramifications.

According to Steve Koenig of the Consumer Electronics Association, there is a small chance that anticipated product launches — such as the Apple iPhone 5, which is expected to hit shelves in June — could be delayed.

"At this stage, consumer electronics companies are still making decisions as to how to proceed," Koenig said. "With the multisourcing and competitive nature of the market, manufacturers will make every effort to continue with product launches as planned."

While there may be some delays for a brief period of time, Koenig believes this won't cause consumers to abandon purchase plans.

"Delays would be regrettable, but people would be willing to wait four or so more weeks to get an iPhone 5," Koenig said. "In some cases, the longer consumers wait for something, the more they want it, so there may actually be ways for companies to make lemonade out of lemons here."

Overall, Koenig noted that the global consumer electronics industry will most likely not be affected in the long term by the disaster.

"We likely see product shortages and pricing issues in the near term, but prices won't spike since manufacturers are price-sensitive in nature when it comes to competition" Koenig said. "More information is coming out daily as to what to expect moving forward, so we’re trying to keep on top of it all."