Nuclear risk threatens supply chain

Philip Salter
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With nuclear uncertainty hanging over Japan, supply chains reliant upon technological components made there have been severely disrupted. Japanese exporters have suffered, while companies reliant upon the country are weighing up their exposure and searching out alternative suppliers. These are uncertain times for technology companies across the world.

Sony, Hitachi, Fujitsu, and many other Japanese technology companies have taken a serious hit, shutting factories across the country. It is not just a matter of production “but physically being able to get them out, as the country faces power cuts and transport problems” says Angus Campbell of London Capital Group. Across Asia, companies reliant on Japan have been impacted – Toyota Motor in Thailand has slowed production due to a bottleneck of supplies.

Beyond the region, focus has shifted to technology companies reliant upon components from Japan. Protective polarizer film for LCDs is only made in Japan, while for many other components Japanese production dominates. The country makes 90 per cent of the world’s Bismaleimide Triazine (BT) resin, used in chips and circuit boards and so important in mobile devices, which is of particular concern. Companies reliant on NAND flash chips, DRAM microcontrollers and LCD panels are also being evaluated.

The Dax index has been hit by the crisis. As Alastair McCaig of WorldSpreads says, the DAX is “seen as an indirect way of investing in Asia” because of the extensive exports of the German tmanufacturers that make up this index. The aftermath of the earthquake has added to existing concerns of rising oil prices with the Dax down 9.5 per cent from its 18 February high. The Dax volatility index hit its highest level in nine months last Tuesday.

The Nasdaq 100, the tech heavy US stock index, should also be watched closely. Last Monday it dropped a little (0.5 per cent), although it has since recovered. If sentiment changes, or events in Japan take a turn for the worse, both could take a tumble.

The Fukushima Daiichi nuclear plant’s alert level was upgraded on Friday, with France’s nuclear safety authority especially worried. There were some signs of improvement on Sunday, however. Hopefully, the technologically savvy Japanese will be able to contain the crisis. If it gets worse, however, global technology firms will suffer even more disruption in their supply chains.