Supply-chain woes hit more Sony plants, Rio Tinto

By @ibtimes on

A shortage of parts will force Sony Corp to cut production or suspend output at five more plants in Japan following the country's catastrophic earthquake this month that has hit the global supply chain.

Global electronics and autos seem to have been most affected by the turmoil, but in an illustration of how the ripples are spreading, global miner Rio Tinto warned the disruptions posed a threat to its expansion plans.

More than 10 days after a 9.0 magnitude earthquake and 10-meter tsunami struck the northeast of Japan, manufacturers are struggling to get back up to speed as factories grapple with a lack of components, power cuts and damage to infrastructure.

Such is Japan's position in the global supply chain, that companies from Apple Inc to General Motors Co and Nokia are feeling the impact.

Electronics giant Sony said it was considering temporarily moving some production overseas after five more plants, mostly in central and southern Japan, were affected by parts shortages stemming from the disaster.

If the shortage of parts and materials supplied to these plants continues, we will consider necessary measures, including a temporary shift of production overseas, the company that makes the Playstation games console said in a statement on Tuesday.

The plants make such products as digital and video cameras, televisions and microphones, the company said in a statement.

The disaster now affects 14 of Sony plants in Japan.

TECH CHAIN VULNERABLE

Japan's grip on the global electronics supply chain is causing particular concern.

The country produces around a fifth of the world's computer chips.

It exported 7.2 trillion yen ($91.3 billion) worth of electronic parts last year, research from Mirae Asset Securities shows.

There are a huge number of little bits of the high-tech food chain which are done nowhere but in Japan, said Sam Perry, senior investment manager of Pictet Japanese Equity Selection Fund. Nobody else has the quality or the consistency, and in some cases the technology to do it.

Japan dominates with the supply of LCD film and sealants for semiconductors, among other areas, Perry said.

You simply can't do high-tech without Japan.

Rio Tinto, the world's second-biggest iron ore miner behind Brazil's Vale, is worried the disaster will disrupt supplies of mining equipment, tyres and components, which could set back some of its expansion plans.

The impact of the Japanese earthquake and tsunami have been many and diverse and they affect us, Rio's head of iron ore Sam Walsh told an industry conference in Perth.

Some steel mills have suspended operations and suppliers of heavy equipment, such as Hitachi, have been impacted, he said.

Hitachi Construction said five plants in Ibaraki Prefecture, north of Tokyo, were closed after the quake. One re-opened on March 17, another two partially re-started on March 21 and March 22.

There is no timetable as yet for re-opening the other two.

Tsunami damage to the nearest port means Hitachi is shipping some products from Yokohama, near Tokyo.

HONDA SUPPLIERS NEED A WEEK

Automaker Honda Motor Co said a fifth of its top Japan-based suppliers affected by the earthquake have said it will take more than a week to recover.

Renesas Electronics Corp, the world's No.5 chipmaker, restarted operations on March 19 at a semiconductor plant in Yamagata prefecture, in northwest Japan, a company spokeswoman said on Tuesday.

After the restart, production at six of the firm's 22 factories in Japan remains suspended, Renesas said.

Sony said production at the five plants will be reduced or temporarily suspended between March 22 and March 31.

A sixth plant in Chiba, north of Tokyo, was set to resume production on Tuesday, but it could be interrupted by the rolling blackouts that are affecting some areas supplied by Tokyo Electric Power (TEPCO), the operator of the stricken nuclear plant.

Production at six Sony plants in northern Japan has been suspended since the disaster and the consumer electronics giant said it was inspecting and repairing buildings and machinery.

Production was continuing as normal at other factories, but the company said it was keeping a close eye on its supply chain.

(Additional reporting by Junko Fujita and Nathan Layne in TOKYO and James Regan in PERTH; Writing by Lincoln Feast; Editing by Neil Fullick)

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