Japan supply-chain woes rattle earnings

By Bill Rigby

SEATTLE (Reuters) - Japan's earthquake and tsunami last month are still rocking a wide range of companies worldwide suffering from shortages of crucial electronics.

Motorcycle builder Harley-Davidson Inc <HOG.N> dropped the low end of its shipments forecast on Tuesday because of problems getting hold of radio components. Revenue from phone handset maker Sony Ericsson <6758.T> <ERICb.ST> missed forecasts because of difficulties with displays, batteries and other parts.

And on Wednesday, Apple Inc <AAPL.O> -- which obtains many parts for its top-selling gadgets from Japan -- may reveal how margins are coming under pressure as global electronics makers vie fiercely to supply the crucial components they need.

"It's cross-sector. Electronics are used in so many areas," said Bryan Keane, equity analyst for the Alpine Mutual Funds. "It has the potential to be very wide-ranging. To some extent, it's going to affect everyone. Even if your direct supplier isn't impacted, your supplier could get their materials from someone in Japan."

Japan accounts for one-fifth of the world's semiconductors, which have found their way into a host of everyday products and industrial components. The uncertainty now is how long the disruptions will last as the country recovers from the March 11 quake.

"The big issue is that even if everything now is under control in Japan, they've lost a big portion of their power," said Keane. "Even if they get the big factories up and running, how often are they going to be able to run them?"


The first major batch of earnings reports to hit Wall Street this week highlighted the problems plaguing global companies across a range of industries, from automobile to the more directly hit semiconductor sectors.

Iconic bike maker Harley-Davidson said it was closely watching the situation in Japan, and expected only a "modest level" of supply chain interruption, but still cut the low end of its shipment guidance [ID:nN19270395]. Its shares fell more than 5 percent.

Cellphone joint venture Sony Ericsson met analysts' profit forecast, but its revenue missed in what its CEO called a "challenging quarter" because of Japan-related disruptions. [ID:nLDE73I082] Shares of Sony's venture partner Ericsson fell almost 1 percent.

General Motors Co's <GM.N> chief executive warned on Tuesday that Japan-related supply problems, alongside the high cost of oil, may be forcing down the company's stock, which was down more than 2 percent, below its initial public offering price.

Late on Monday, chip maker Texas Instruments Inc <TXN.N> warned of slower-than-usual quarterly sales growth as it scrambles to restart production after the quake, and said it was unclear when the supply of the silicon and wafers it needs will return to normal.

That followed a quake-related profit warning from Japanese electronics manufacturer Toshiba Corp <6502.

Later on Tuesday, rival chipmaker Intel Corp <INTC.O> is scheduled to report results, although it has not given any indication that production has been affected.

Problems could extend into the second and third quarters, said Keane, although inventories -- which had been running high -- may provide some comfort.

"There is room, there is a cushion," he said. "The question is, How long before everyone can get back up to 100 percent?"

(Writing by Bill Rigby, editing by Edwin Chan and Matthew Lewis)