Top mobile telecom equipment makers Ericsson and Alcatel-Lucent are braced for a supply squeeze following Japan's earthquake, adding to fears for a sector hampered by shortages.

Japan, a dominant chip industry player with around a fifth of the world's semiconductor production, has seen factories producing everything from chips to car parts closed following Friday's earthquake, threatening supplies to manufacturers across the globe.

Many are making contingency plans and trying to source key components elsewhere, while working out how much inventory they have available to keep production going and for how long.

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 on Wednesday.

Analysts have said if the supply chain were broken for even a few weeks, the impact could be felt in higher prices or shortages of gadgets such as Apple'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 turned out to be limited, power and transport disruption could result in significant shortages of electronic parts and lead to big price hikes, research firm IHS iSuppli said.

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.

That would spell particularly bad news for a telecom equipment-making sector already suffering from shortages.

In January, Nokia Siemens chief executive Rajeev Suri told Reuters component supply was tight for the industry and it would take a couple more quarters to get back to normal.

MEMORY GAP

Ericsson said while it was too early to get an accurate picture of how Japanese enterprises were affected, it did not expect the disaster to have a material impact on first-quarter sales, adding it had no reports of injured or missing employees.

Ericsson made no mention of Sony Ericsson, its joint venture with Japanese group Sony, which makes mobile handsets. Sony Ericsson was not available for comment.

French company Alcatel-Lucent said while it did not manufacture equipment in Japan, it depended on suppliers there for components such as memory.

We ... believe that there will be an impact on our industry given the importance of the disaster ... the situation is not yet stabilized and we are still assessing the consequences so we cannot say what this impact will be, a spokesman said.

Alcatel-Lucent said it was reviewing contingency plans and, like others, would look for alternative sources if needed, although it had enough stock for now.

Nokia Siemens said it could not yet quantify any impact from the earthquake. Although we do source a small number of components from Japan, it is too early to assess any impact on future supply, a spokesman said.

Lum at EJL Wireless said the effect 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.

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 do not expect inventory to be more than 2-3 weeks in the supply chain, Lum said.

WAIT FOR THE BLACKOUTS

In Japan, electronics manufacturers warned production would be hobbled by further supply and distribution problems as companies struggle with power blackouts following the quake, which are expected to persist into April.

Canon said it would suspend production at one of its main plants in Oita, southern Japan, blaming problems with parts supply and distribution, while Nikon said the suspension of its precision equipment plants in north Japan could eventually disrupt production at factories closer to the capital, which could run out of parts.

News that the earthquake has disrupted the supply chain for production bases in Kyushu, a long way from the Tohoku region, will probably come as a bit of a surprise, but this shows the potential for similar disruption at other companies, Citigroup analyst Masahiro Shibano said in a note.

(Additional reporting by Simon Johnson in STOCKHOLM; Marie Mawad in Paris, Isabel Reynolds and Tim Kelly in TOKYO; Writing by Alexander Smith; Editing by Jane Merriman and Dan Lalor)

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