Japan takes toll on U.S. tech companies
By David Goldman, staff writerMarch 15, 2011: 12:54 PM ET
NEW YORK (CNNMoney) -- The impact of the massive earthquake that struck just off the coast of Japan last week has been felt as far away as Texas.
Dallas-based Texas Instruments (TXN, Fortune 500) said late Monday that it had suffered "substantial damage" to its production plant in Miho, Japan and slight damage to its Aizu-wakamatsu plant. Both facilities are located north of Tokyo in the areas most affected by the disaster.
The Miho plant, which was responsible for about 10% of the company's output last year, will be mostly offline until May, and it won't be fully operational until the middle of July, the company said. That means full shipment capabilities won't be restored until September.
The company makes silicon wafers at its Miho plant, which are the thin pieces of silicon glass used to manufacture microchips.
TI believes it can quickly transfer about 60% of the facility's wafer production to other sites, and it is scrambling to increase that percentage. The company expects to take a sales hit during the current quarter due to the disruption, but it didn't give an exact estimate.
Shares of TI fell 2% on Tuesday.
Austin-based Freescale Semiconductor, which is among the largest microchip makers in the United States, said its facility in Sendai, Japan was closed down. Sendai is close to the epicenter of the earthquake, and the company said it is having difficulty assessing damage due to the disruption in communications and transportation in the area.
And Round Rock, Texas-based Dell (DELL, Fortune 500) temporarily shut down an administrative building in Kawasaki, Japan. The building houses the company's local marketing team, and Dell said everyone has been accounted for. Operations in Japan weren't disrupted.
Full coverage of the Japan disaster on CNN.com
It's not just U.S. companies, of course, that have been impacted. Japan is the world's leading source of semiconductor and LCD manufacturing equipment, according to DisplaySearch. Japanese companies Hitachi (HIT), Sony (SNE) and NEC have all reported damage to their various production facilities.
Experts say that will send ripples down the supply chain of both microprocessor and LCD production, but that this will not have a substantial effect.
"Even though some companies have already announced their Japan facilities have not been directly impacted by this natural disaster, some degree of collateral damage will be difficult to avoid," said Brian White, analyst at Ticonderoga.
For semiconductors, those disruptions are expected to be too minor for consumers to notice. Most consumer electronics devices have the capability of swapping one microchip for another from a different company, which means the TI facility shutdown will likely have no impact on the availability of smartphones, tablets, cameras or other gadgets that use TI chips.
"TI is not making anything specific that can't survive without it," said Paul O'Donovan, analyst at Gartner. "Most consumer electronics source from a variety of vendors. That's why we have such competitive pricing in that space."
Intel (INTC, Fortune 500), which has no production facilities in Japan, has research centers located in Tokyo and Tsukuba, which were both damaged by the earthquake. No one was hurt, and the company said it believes its supply chain will not be severely impacted. Shares fell 3% Tuesday.
"Preliminary assessments are relatively positive from our direct suppliers, whom we currently believe came through this event in reasonable shape," said Chuck Mulloy, spokesman for Intel. "Challenges in power and transportation infrastructure are evolving and we continue to monitor and interpret the implications to our suppliers."
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LCD displays may see more of a "hiccup," experts said.
Though LCD display companies have been affected only slightly, Ticonderoga's White said LCD components may become unavailable for a short time, impacting sales of LCD glass and panels temporarily.
It won't be a major disruption, however: DisplaySearch's David Hsieh said there was enough inventory slack built up in the supply chain before the earthquake, so "there does not appear to be any major impact or damage to the overall supply chain."
Still, FBR Capital Markets analysts noted that the disruption in flash memory chips and LCD screens could hurt Apple's already tight inventory of iPad 2 components. Shares of Apple (AAPL, Fortune 500) fell 2% on Tuesday.
Tech stocks took a big hit Tuesday, following the rest of the market down. Chipmakers were among the hardest hit. AMD (AMD, Fortune 500), Nvidia (NVDA) and Qualcomm (QCOM, Fortune 500) all fell 2%.
Credit: CNN (www.cnn.com)
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