Quake Shakes up China’s Component Supply

Japan’s destructive earthquake has forced many component suppliers to close their factories. Several China makers are now unable to source chipsets, and the majority are dealing with soaring costs. China’s consumer electronics companies are gearing up for tighter components supply and exponentially higher costs.

While most makers use components sourced locally or from Taiwan or South Korea, they are still feeling the effects of the spike in the cost of Japan-made alternatives. The impact, however, will have varying levels across multiple industries. Shortages and high costs will have little bearing on companies that make their own components or export mostly low-end and midrange models. But sectors that cannot use alternatives to Japan-made components and makers that rely heavily on materials imported from the quake-stricken country will be most heavily affected. Industries where key components are produced only by a handful of suppliers will feel the impact as well. The last one is particularly true for NAND flash memory chips. Toshiba, one of the world’s major suppliers of the component, has shut down some factories as a result of the quake. Most China makers do not procure from Toshiba, but from Samsung and Hynix in South Korea. Even so, Toshiba’s factory closures have affected their chip sourcing. DRAMeXchange, which tracks and posts contract and spot prices for various memory chips, showed quotes for all types of Samsung and Hynix NAND flash rose on March 14. Samsung’s 16GB (MLC) chip, for instance, surged nearly 33 percent from $3.05 to $4.05. The same chip from Hynix climbed 27 percent to $4.

China manufacturers are still expecting spot prices to increase further in the months ahead. Moreover, several have had their component orders cancelled by the chip suppliers due to shortages. Some electronic makers in Shenzhen, Guangdong province, even had to suspend production due to interrupted Toshiba NAND flash chipset supply. These companies are now urgently looking for alternative providers.