Japan’s twin disasters – the earthquake-driven tsunami and the damage to several of the nuclear reactors that provide most of the country’s electrical power – will have long-term impact on Japan’s ability to manufacture and deliver key components for an enormous range of products, including lighting and projection systems. Scores of Japanese firms, from component makers to electronics firms and automakers, were forced to keep plants shuttered, and damage to infrastructure including power, roads, rails and ports will take months to repair. It’s likely that damage to the global manufacturing and supply chain will disrupt many industries for months to come.
Electronics suppliers, including companies that make parts for lighting systems makers and distributors, were hit immediately. Research firm IHS iSuppli said the quake and its aftermath could result in significant shortages of some electronic parts and lead, in turn, to price hikes, citing the disaster’s impact on the transportation and power infrastructure. The resulting supply disruptions and shortages will mean rising prices for components including NAND flash memory, dynamic random access memory (DRAM), microcontrollers, standard logic, LCD panels, and LCD parts and materials.
Japan accounts for one-fifth of the world’s semiconductor production, including about 40 per cent of the flash memory chips used in everything from smart phones and tablets to computers. Even if shipments of semiconductor parts affected by the quake were disrupted for only two weeks, shortages and their price impact were likely to linger until the third quarter of this year, iSuppli said. Key video and visual systems makers, including Sony, Canon and Toshiba (which supplies about one-third of the world’s NAND flash memory chips), all said that short-term manufacturing and supply would be disrupted.
Beyond Japan
That said, however, the commoditization of lighting products over the last decade or so has prompted the shift of manufacturing of many of those systems and products away from core entertainment user markets – including the U.S. and Japan – and to China and other Asian manufacturing centers, such as Taiwan, Thailand and Vietnam, and that has softened the impact to the supply chain. Bob Gordon, president and CEO of A.C.T Lighting, said that, these days, “little we do is dependent on Japanese manufacturers. Many components used in our products come from Asian manufacturers, but not from Japan anymore.”
The industry is further insulated by the complexity of many costlier high-end products, which don’t easily lend themselves to outsourced manufacturing. They are also profitable enough to manufacture in higher-priced labor markets, such as Italy (Clay Paky) and Wybron (Colorado Springs, CO).
However, Keny Whitright, Wybron’s president, noted that while the power supplies they use for their lighting products are manufactured in China and Malaysia, some of the manufacturers of those items are headquartered in Japan, and that R&D going forward may be impacted. Furthermore, Whitright adds, Wybron’s main machine tool vendor told them that although their factories in Japan were unharmed, ongoing rolling blackouts due to the damage done to the nuclear reactors that supply most of Japan’s commercial electrical power could create supply chain problems for U.S. customers in the short term.
Jack Kelly, president of Group One Ltd., which owns lighting systems maker Elektralite and distributes LED fixture manufacturer Pulsar, says the diversity of component sources for all lighting products means that the effect of the Japan disaster on this industry’s supply chain won’t become fully clear for weeks or months, and will affect different companies in different ways and degrees. “A lot of this industry is really assembly rather than actual manufacturing,” he pointed out. “And there are alternatives when it comes to sourcing certain components.” South Korea, he noted, has become a major supplier of LED components, as well as silicon components and switches. “It’s going to take time to see how this all ripples through the supply chain,” he said.
Video Systems
Video systems are affected in a similar way, which is to say, mainly at the component level. Long term, there are indications that key equipment production may be delayed, according to DisplaySearch, a division of market analysis company NPD that covers the flat-panel sector. Supplies of NF3 (nitrogen trifluoride) gas, used in cleaning chemical vapor deposition chambers in the production of TFT LCD and semiconductors, were tight before the earthquake, and growth in the display market had increased demand, even as the disaster struck. In addition, connectors used for the power and graphics signals in LCD modules may be in short supply due to the earthquake. “In most of these cases, panel makers are holding at least a few weeks of inventory, giving them some time to locate alternative sources,” the March DisplaySearch report stated, but it added, “one area that does not allow stockpiling is manufacturing equipment needed to expand existing capacity.” That could impact the installed AV systems sector here over the summer.
The prospect of prolonged supply disruptions still loomed in early April. The two-year-long recession forced many companies to keep their inventories tight, and replacing those diminished parts and products would have compelled many to look for alternate sources. Next month is the start of the summer event season, with an increase in the amount of live concert touring, conventions and other shows that require lighting, projection and other services. By then the long-term impact of the disaster should be more apparent.
