Whether you’re actively following the disaster in Japan or not, it’s difficult to miss the unfolding story and—at times, disturbing—photos and video of the aftermath of the earthquake and subsequent tsunami. Making the terrible situation worse, is growing concern about the future of Japan’s nuclear power plants.
As The New York Times reported today, 2,722 people are confirmed to have died in the earthquake and tsunami, and thousands remain missing. Making the tragedy even worse, is that as the Times reported, the threat of radiation exposure continues because the reactor blast today (the third in four days) at the Fukushima Daiichi Nuclear Station drove up radiation levels in the air over Tokyo.
While the aftershocks and smaller earthquakes continue, there now are power cutbacks to contend with as well. Since it has lost the power generated by the nuclear plants, Tokyo Electric has announced plans for rolling blackouts to conserve electricity.
The foremost concern, of course, is aid and relief efforts. The next concern is that the combination of events has had a catastrophic impact for Japanese companies, and that there are far-reaching implications for many industries and even countries. As reported yesterday by Reuters, companies in neighboring South Korea that depend on Japanese suppliers for LCD glass, chip equipment, silicon wafers and other products used to produce semiconductors have already felt an impact.
South Korea is also home to the world’s top three shipbuilders--Hyundai Heavy Industries, Daewoo Shipbuilding and Marine and Samsung Heavy Industries. These shipbuilders, and other companies that rely on Japanese steel also expected to face supply constraints or higher prices due to supply disruptions.
That’s notable because as Kim Hyun-tae, an analyst at Hyundai Securities in Seoul, explains in the article, Japan is one of the major steel producers, and exports roughly 40 percent of its output. The earthquake has reportedly effected around 20 percent of the Japanese steel production capacity.
The electronics supply chain may be the hardest hit because although Japan is a major global supplier of chips, flat-panel displays and other components used in devices like computers, tablets, digital cameras, Blu-ray players and televisions, it also is a major exporter of consumer electronics.
While the earthquake and tsunami disrupted Japan’s power and transportation infrastructure, they also significantly damaged factories. The subsequent factory closings are already creating problems in the tech industry. According to a second Times article today, Toshiba, which produces roughly a third of the world’s chips used in cameras, smartphones and tablet computers, has announced it closed some factories and that its production would be reduced.
Companies that use high-tech electronics employ a complex network of suppliers to keep inventories of parts low, and most likely, there are enough parts in the pipeline to allow production to continue for some time. There may still be a significant impact. Consider, for example, the rapidly growing tablet market. Apple experienced difficulty last year sourcing components for its iPad, and with growing demand for tablets as well as increasing competition, demand for components may well outpace supply.
Finally, the auto industry will also suffer setbacks to some degree. Japanese automakers hoped to restart production at most of their domestic plants this week, but they are still evaluating how much the disaster damaged their factories as well as nearby roads, railroads and ports. At the same time, nearly all automakers, even those with no plants in Japan, may ultimately be forced to halt production of some vehicles. That’s because Japanese suppliers produce many of the electronics and other components used in today’s vehicles. If they can’t produce and ship those components, it will cause a ripple effect throughout the industry.
Have your contingency plans covered a disaster of this magnitude?