Supply concerns grow as Japan lacks parts, power

By Robert Hetz and Gilles Guillaume

MADRID/PARIS (Reuters) - From Apple's new iPad to Chevrolet pick-ups, concern is spreading down the global manufacturing supply chain about the impact of Japan's earthquake last week.

Plant shutdowns across Japan following the earthquake, tsunami and nuclear crisis threaten supplies of everything from semiconductors to car parts for manufacturers across the globe.

Even where factories in Japan are operating, power outages, shortages of fuel and raw materials and ruptured logistics mean products and parts face delays in getting to customers.

Honda Motor Co said on Friday it had extended a production halt in Japan, where it makes more than a fifth of its cars, for another three days to next Wednesday.

And in a sign that the European manufacturers are also starting to feel the squeeze, carmakers Renault and Opel warned they would have to reduce production.

Opel, the European arm of General Motors, called a 24-hour production stop for next Monday and an eight-hour halt next Friday at its plant in Saragossa, Spain, due to the lack of an electronic item which had not arrived from Japan. Unions say about 2,400 cars will not be made during the stoppage.

Renault said it would cut output at its factory in Busan, South Korea, by 15 to 20 percent after disruptions to Japanese supplies mainly affecting the Renault-owned Samsung SM7. The factory normally produces 20,000 vehicles per month.

"Production should go down by 15 to 20 percent, corresponding to 3,000 fewer cars," said a Renault spokesman. "We hope a solution will be found rapidly."


Japan's grip on the global electronics supply chain is causing particular concern. The world's third-biggest economy exported 7.2 trillion yen ($91.3 billion) worth of electronic parts last year, according to Mirae Asset Securities.

"Should the Japan crisis be prolonged, I expect a shortage of electronic parts in the second quarter," said James Song, an analyst at Daewoo Securities, noting Japan provides 57 percent of the world's wafers, used to make the chips that go into mobiles phones, cameras and other electronic devices.

Apple may face shortages of key parts for its newly released iPad 2, according to research firm IHS iSuppli.

Several parts of the new version of the popular iPad tablet PC come from Japan, including the battery and the flash memory used to store music and video on the device.

Toshiba Corp, one of the companies that produces the NAND flash memory used in the iPad 2, according to IHS iSuppli's research, briefly shut a flash memory facility in Japan and warned it could face problems getting raw materials.

Memory chip industry tracker DRAMeXchange said it had seen a panic surge in NAND flash spot prices and a 5 to 15 percent rise in the contract average selling price. It said it expected the earthquake to cut global NAND flash supply by up to 4 percent in the second quarter, in terms of the amount of memory available.

Goldman Sachs warned of potential bottlenecks in the supply of silicon wafers, conductive film used in LCD circuits and resin used to connect chips to boards -- products made by Japanese companies such as Shin Etsu and divisions of Sony, Hitachi and Mitsubishi.

"We don't have any direct suppliers in Japan but some of our Chinese partners may be exposed to the country," Archos Chief Executive Henri Crohas said.


Japan's top car makers including Toyota Motor Co and Nissan Motor Co are struggling to restart output amid a shortage of parts, labor and power.

GM said it would temporarily idle a pick-up truck plant in Louisiana, where it builds the Chevrolet Colorado and GMC Canyon models, due to a parts shortage.

"Like all global automakers, we will continue to follow the events in Japan closely to determine the business impact," GM said in a statement on Thursday.

North American output is likely to be affected unless Japanese suppliers revive their plants and send parts within 10 days, Wolfe Trahan & Co analyst Tim Denoyer said in a note.

Japanese company Jamco that makes galleys for the long-awaited Boeing 787 Dreamliner, said it could face delivery delays due to scarce gasoline supplies.

Lufthansa Cargo, which moves electronics, liquid crystals for flat screen displays and pharmaceuticals out of Japan, said it may be forced to cancel some flights next week.

"The booking situation from Germany is good and from Japan it is still pretty good as well," a spokesman said. "But it is slowly becoming noticeable that production is slowing in Japan."

Nestle, the world's biggest food maker, said its factory in Kasumigaura was partially resuming production following the disaster.

Heavy equipment maker Caterpillar Inc warned it expects sporadic disruptions to its supply chain after the quake affected production at two of its facilities in Japan.

Denmark's Novo Nordisk, the world's biggest insulin producer, has suffered disruption at its Koriyama plant, where only 10 percent of the normal 100-strong work force are still on site. Novo said it was continuing to ship insulin from Koriyama and distribution centers were well stocked.

GlaxoSmithKline said its drug factory at Imaichi had suffered minor damage and was out of action, but the company expects it to resume operations soon. In the same sector Switzerland's Roche was assessing the situation at one plant in Utsunomiya that had temporarily halted production and would investigate any supply chain problems. It said the site was not affected by any serious damage.

(Additional reporting by Alexei Oreskovicin, Isabel Reynolds, Miyoung Kim, Matthias Blamont, Florent Le Quintrec, Victoria Bryan, Ben Hirschler, Robert Hetz, Katie Reid, Andrew Callus, Georgina Prodhan; Writing by Ian Geoghegan, Tim Hepher and Sophie Walker; Editing by Lincoln Feast, David Holmes and Matthew Lewis)

($1 = 78.855 Japanese Yen)