STOCKHOLM/HELSINKI: Top mobile telecom equipment maker Ericsson warned that Japan's devastating earthquake would hit the supply of components, adding to concerns about a sector already hampered by shortages.
Japan, which is a dominant chip industry player with around one-fifth of the world's semiconductor production, has seen factories producing everything from chips to car parts closed following Friday's huge earthquake and tsunami.
"It is reasonable to expect that the events in Japan will affect supply of components but it is too early to say to what extent," Ericsson said in a statement on Wednesday.
Experts have warned that if the supply chain is broken for even a few weeks, the impact could be felt in higher prices or shortages of gadgets such as Apple Inc's iPad and other tablets, smartphones and computers for months to come.
"Pretty much everything is halted or mostly halted through April ... Even before the crisis the industry was near capacity.
I would expect an impact to Q1 because of the remainder of March and also for Q2 because of all of April," Earl Lum, head of telecom gear and component research firm EJL Wireless, said.
Even if damage to electronic production facilities turns out to be limited, power and transport disruption could result in significant shortages of some electronic parts and lead to big price hikes, research firm IHS iSuppli has warned.
NAND flash memory chips used in the fast-growing mobile devices market, dynamic random access memory (DRAM), microcontrollers, standard logic, liquid-crystal display (LCD) panels, and LCD parts and materials could all be hit.
This spells particularly bad news for the telecom equipment making sector, which was already suffering from shortages.
In January Nokia Siemens Chief Executive Rajeev Suri told Reuters that component supply was tight for the industry and forecast it would take a couple more quarters to get back to normal levels.
Ericsson said it did not expect the disaster in Japan to have any material impact on its first quarter sales and it had no reports of injured or missing employees there.
"Although it is too early to get an accurate picture of how Japanese enterprises are affected, and how this affects Ericsson and the industry, no material impact on Ericsson's sales are expected for Q1 2011," the company said.
Ericsson made no mention of Sony Ericsson, its joint venture with Japan's Sony, which makes mobile handsets. Sony Ericsson was not immediately available for comment.
Nokia Siemens said it could not yet quantify any impact from the Japanese earthquake.
"Although we do source a small number of components from Japan, it is too early to assess any impact on future supply," said a Nokia Siemens spokesman.
Lum at EJL Wireless said the effects would be felt for some time to come across the sector.
"The supply of critical radio components such as surface acoustic wave (SAW) filters and oscillators has been disrupted.
We expect that supply will remain restricted through April and this will impact manufacturers such as Alcatel-Lucent, Nokia Siemens Networks, Ericsson, Huawei and ZTE (which are) shipping wireless infrastructure equipment," Lum said.
And there is not sufficient inventory for the gap to be filled if the disruption persists.
"With the nuclear issue still unclear, this won't be fixed anytime soon. I don't expect inventory to be more than 2-3 weeks in the supply chain," Lum added.
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