Japanese disaster warns of other Asian vulnerabilities

Nations across the world should be prepared for any further disruptions to the global electronics supply chain following the Japanese earthquake.

Due to the interconnectivity of a globalised system there are inherent risks of a knock-on effect when a nation which accounts for a large portion of production is forced to stop or slow manufacturing.

And according to Dale Ford of IHS iSuppli, countries across the globe need be more aware of the problems that could be faced by similar catastrophes in the future, with a number of other nations catering for very specific market areas.

“It’s worthwhile to consider what could happen if a production disruption were to strike other key electronics production regions where manufacturing is highly concentrated,” he said, naming Taiwan and South Korea as other countries which account for large levels of production.

Following the Japanese earthquake and tsunami, silicon wafer production for memory devices meant that DRAM prices shot up rapidly.

And with so many natural disasters in recent memory it is no surprise that Ford is demanding caution over possible dangers in the future.

“As we move forward, the global electronic industry will have to learn how to manage potential disruptions in various regions,” said Ford.

For example, Taiwan is the main place for outsourcing of chip manufacturing, accounting for a massive 67 percent of global production, with big names such as TSMC and United Microelectronics Corp situated on the island.

Across the globe more than 150 semiconductor companies call on Taiwan for chip supply, with the market worth an estimated $30 billion in annual revenue.

Taiwan is also responsible for 37 percent of display drivers, 58 percent of small to medium LCD panels and 34 percent of the world’s supply of large LCD panels.

South Korea also is another area with high production concentration where a slow-down could have a massive worldwide impact, particularly in the memory sector, with Mike Howard, IHS DRAM expert, saying that “If manufacturing were to be disrupted by some event occurring in this small geographic area, the impact on the global electronics supply chain would be devastating”.

Indeed nearly 40 percent of the world’s production capacity of DRAM is situated in close proximity to just the capital Seoul.

Samsung and Hynix Semiconductor are some of the South Korean firms which push the nation’s output to 59 percent of all global DRAM production, 49 percent of NAND flash memory, 37 percent of display driver semiconductors as well as 51 percent of large LCD panels.

Meanwhile China is said to be home to most of the original design manufacturing for the world’s major brands, with much of the production involved centred around the Shanghai and Shenzhen areas.