The impact of last month's earthquake in Japan on the $214 billion cellphone industry will be under the spotlight when the world's top phonemakers report their quarterly earnings from next week.

Nokia, Research In Motion and Sony Ericsson have said the earthquake and resulting tsunami, which has shut down factories and affected deliveries, could hit their supply of components or the availability of their phones.

There is widespread uncertainty about the Japanese situation ... We believe the shortages will start to bite in the third quarter, when we'll get a clearer picture of who is most affected, said Ben Wood, head of research at CCS Insight.

Phone vendors usually carry four to five weeks' supply of components, and have an additional six or seven weeks' inventory of finished phones in the sales channel, said research firm Gartner.

The real extent of the impact remains unclear as it will depend on how quickly some of the factories that are still closed will re-open, said Gartner analyst Carolina Milanesi.

One of the critical bottlenecks could be the Japan-originated chemicals used in phone batteries, she said.

Kureha Corp, which satisfies about 70 percent of the market for heat-resistant polyvinylidene fluoride (PVDF), used as an adhesive in lithium ion batteries, halted production at its factory in Iwaki, Fukushima Prefecture, following the disaster.

The company has been relying on inventories and hopes to restart production at the end of April, but a spokesman said it was likely that clients had been affected.


Sony Ericsson, a joint venture between Sony Corp and Ericsson, said last week the quake was limiting the volume of its arc, Play and neo smartphones, and delaying the wider launch of the neo to the third quarter.

Given these three devices are central to Sony Ericsson's relatively narrow 2011 portfolio, there is likely to be considerable concern about the financial implications, said CCS's Wood.

Sony Ericsson warned in January of a weak first quarter as it struggled to fill an awkward hole in its product portfolio, with old models losing appeal faster than the firm expected and new models only starting to help from the second quarter.

The company has to cut the prices of its old models to maintain its market position, analysts said.

Older products will have to be discounted to remain somewhat relevant. Sony Ericsson really needs the new products to get to the market and ramp up quickly, said Milanesi.

Also Nokia, the world's biggest vendor by volume, warned last month it would have shortages of some of its phones as the quake is set to cause industry-wide shortage of components and raw materials sourced from Japan, but said the impact on earnings would be limited.

On March 24 Blackberry maker RIM disappointed the market with its projections, and the firm said delivery times for some components were uncertain.


On average analysts expect global cellphone sales volumes to have grown 10.8 percent in January-March, according to 18 analysts in a Reuters poll.

The phone market has recovered from a slump in 2009, but growth is expected to have peaked in the first half of 2010, with a slowdown to 9 percent forecast for 2011, the Reuters poll showed.

Among the largest phone makers reporting their March quarter earnings in coming weeks, only Apple is expected to win further market share, with Samsung's share flat, and all others seeing theirs shrinking.

Apple is expected to have sold 15.8 million iPhones in the quarter, up 81 percent from a year ago.

Sony Ericsson, the first cellphone vendor to unveil its March quarter earnings, will report on April 19, Apple the following day, and Nokia on April 21. Samsung and LG Electronics, which have won a share of the smartphone market with models running Google's Android software, will report on April 27 and April 29.

Analyst said Samsung sold around 13 million smartphones last quarter, and LG over 4 million.

A growing appetite for Android phones is set to lift the 2011 smartphone market 58 percent from last year, according to Gartner.

Last week Taiwanese smartphone maker HTC Corp said first-quarter profit almost tripled, beating forecasts, driven by strong demand for its Android phones.

No. 3 phone maker LG is to report a third consecutive quarterly loss from its handset operations, but the worst is expected to be over for the unit. It is seen returning to profit later this year as it expands its smartphone offering.

Overall phone shipments may have decreased, but selling prices are improving due to growing smartphone sales, said Kwon Sung-ryol, an analyst at Dongbu Securities.

(Additional reporting by Miyoung Kim in Seoul and Isabel Reynolds in Tokyo; Editing by Will Waterman)

($1=85.03 Yen)