How can Japan earthquake have an effect on Apple’s iPad supply chain?

March 12, 2011 1:38 am0 commentsViews:

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Apple releases the iPad two on Friday and on the exact same day a nine.0 earthquake rocks Japan, one in every of the centers of NAND flash production. What may the fallout from the quake be to Apple’s product availability and rollouts additionally on prices?

According to analyst Jim Handy at Objective Anaysis Semiconductor Market analysis, variety of Fujitsu and Toshiba producing sites are located close to the earthquake epicenter. additionally, Tokyo and Kobe alternative centers are located on the east coast of Japan.

In a letter this morning he said the market in Japan additionally as production for the planet markets are affected.

Over forty % of the world’s NAND flash and roughly fifteen % of the world’s DRAM are manufactured in Japan.  Japan could be a vital supply of chips to support shopper electronics devices.  A two-week shutdown would take away from production a large share of every of those.  It doesn’t take an oversized production decrease to cause costs to extend dramatically.  Objective Analysis anticipates phenomenal worth swings and enormous near-term shortages as a results of this earthquake.

Demand are impacted additionally since several electronics makers are in Japan, and their consumption of semiconductors are halted till earthquake injury is repaired.

Apple NAND suppliers don’t seem to be all in Japan. in line with iSuppli, Apple is equipped by Toshiba and Samsung additionally as alternative vendors. However, Apple primarily purchases flash memory from “top flight” vendors, like Samsung and Toshiba. Most of Apple’s DRAM comes from Korean vendors and would be unaffected.

In the January money decision with analysts, Apple Chief Operating Officer Tim Cook talked concerning provide chain problems for flash additionally because the Japanese market, that had been a surprise for the corporate.

And there are many alternative Asian countries doing extraordinarily well. Japan isn’t within the phase that you’re looking, however Japan by itself, the revenue was up eighty three % year-over-year. And if you’re aware of the japanese economy and also the growth there, to grow eighty three % on the bottom that we’re doing is beautiful. And therefore we have a tendency to are inserting additional and additional resource in these areas and still rummage around for growth potentialities throughout Asia.

Cook said in January that the corporate expected a positive pricing surroundings for DRAM. and that they had expected costs in bound commodities to fall.

Cook was asked concerning long-term commitments in on provide. He offered some details on flash provides.

From our purpose of read on the planning aspect, we have a tendency to style elements where we have a tendency to believe we will innovate beyond what’s obtainable within the market. and also the most up-to-date example of this is often the A4 chip. however with the A4 chip, we have a tendency to didn’t feel like we have a tendency to had to take a position within the fab itself and build the fab as a result of we have a tendency to felt like they were sensible choices within the marketplace for doing that, however not sensible choices in terms of shopping for a style, and therefore we actually centered on style.

On the operational aspect of the house, as you most likely bear in mind, we’ve traditionally entered into bound agreements with completely different individuals to secure provide and alternative edges.

vital|the biggest} one within the recent past has been we have a tendency to signed a cope with many Flash suppliers back at the top of 2005 that totaled over $1 billion as a result of we have a tendency to anticipated that Flash would become increasingly vital across our entire product line and increasingly important to the trade. And therefore we have a tendency to wished to secure provide for the corporate, and that we suppose that, that was an fully fantastic use of Apple’s money. and that we constantly rummage around for additional of those.

And therefore within the past many quarters we’ve identified another space and are available to some recent agreements that Peter talked concerning in his gap comments, in that these payments include each prepayments and capital for method equipment and tooling. And almost like the Flash agreements, they’re centered in a district we have a tendency to feel is extremely strategic. And therefore I’d like to not go into additional detail concerning what specific space it’s in, however it’s constant reasonably thinking that led us to those deals that led us to the Flash deal.

Of course, the iOS devices are flash based mostly. however Apple is additionally showcasing the performance edges of flash memory in its Mac product, like the MacBook and MacBook Air. Solid-state drives are an possibility for MacBook professionals. Customers need the flash goodness.

So here’s my guesstimates: Apple has locked in costs for flash memory elements. It should have an affordable provide already within the chain. And with $43 billion in money, the corporate will get what it desires. however seemingly it won’t got to stretch way.

As one of the world’s biggest customers for the technology, it’ll get its provide before the smaller patrons — though those “smaller” firms are Hewlett Packard, Motorola and even Samsung. within the producing business, Japanese producing giants and also the arms of Korean chaebol conglomerates can’t play in-house favorites. the most important client gets initial alternative.

That means that everybody else, massive and tiny can feel the pinch over Apple. Way more.

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