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Japan Earthquake and Tsunami: Possible High Tech Impacts

The record earthquake and resulting tsunami that hit Japan are a calamity in which the death toll mounts in the densely populated region. Early video and reports suggest that the devastation is enormous. And with the world's third largest economy, upset operations, damaged facilities, and disrupted global supply chains will have a significant impact on high tech.

Last year Japan imported $636.8 billion in machinery and equipment, fuels, food, chemicals, textiles, and raw materials. Of that, 22.2 percent came from China and 10.96 percent from the United States. The U.S. exports totaled $765.2 billion, largely in motor vehicles, transport equipment, electronics, semiconductors, and chemicals.

Japan is a major supplier of components to the electronics industry. For example, Toshiba sells hard drives to Apple (AAPL) for use in iPods. Japanese electronics firms are major producers of LCD televisions. The country produces between 20 percent to 25 percent of the world's integrated circuits, including half the global NAND flash memory chips. Because the industry has concentrated manufacturing in Asia, any reduction can be significant.

As Josh James, vice-president of research and industry analysis for the TechAmerica Foundation, said during a telephone interview with BNET:

It's very early to say what the true impact [on high tech] will be, but my initial impression is global supply chain for technology is going to be incredibly disrupted. Even if none of the plants were destroyed and damaged, I think you'll still see a disruption in how the flow of those manufactured goods go to the United States or Singapore or China or wherever they're assembled or made.
There are already many reports of factory damage and employee evacuations among major Japanese technology companies:
Until there is more information, it is impossible to say how long-term the disruptions might be. But the effects should quickly begin to hit the industry, as so many companies work on a just-in-time approach to manufacturing, ordering components to arrive when they are needed. That means there is little to no inventory available to tide manufacturers over in case of major disruptions.


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