Japan quake affecting Suppy Chain of Apple iPad 2

As if the list of problems resulting from the earthquake that shook Japan last Friday wasn't big enough, stock markets are seeing sharp declines due to the fear that the earthquake has affected manufacturers supply chains because of the temporary closure of many production facilities. The earthquake and tsunami ravaged mainly the north eastern part of Japan but the threat of a nuclear meltdown has caused many facilities to shut down its operations to conserve energy in part with the already planned black outs that will be taking place.

So how does all this affect the newly released iPad 2? According to a report by IHS iSuppli, Apple uses five components in manufacturing the iPad that come from Japan, main parts which include the flash memory and battery. Japan is said to produce upwards of 40% of all flash drives with big electronics companies getting these parts from Japan. Apple is currently running on their remaining supply of components which is said to last them another 2-3 weeks while the uncertainty of when manufacturing facilities will resume production remains unknown, especially with the Fukushima nuclear meltdown crisis still keeping Japan, and the world, on edge. The crisis overseas is monumental and economically the repercussions are being felt at home. Many companies, such as Apple, will now face a shortage of their products and see a rise in production costs indefinitely.

As soon as the production process is hit, the effects inevitably reach us, the consumers. What seemed like a crisis far away from us is now becoming a reality that products like the Apple iPad 2 and Toshiba cellular phones (which get many of its components from facilities that were located very close to the main area hit) may not be available to us in the very short future. With the future of all production and manufacturing facilities in Japan uncertain and some plants having no foreseeable reopening dates, how do we begin to deal with this huge void in the supply-chain? Well as consumers it seems we must start getting used to the idea of less is more, for now, and looking to more locally produced products until those companies with production facilities in Japan can find new plants elsewhere. Based on reports, we will see supply chain shortages get very bad in as little as three months. That is when most electronics firms will start to run out of their manufacturing components. Fortunately for Apple, being a tier-1 vendor and its ability to pay fully in cash will help them in the future when it comes time to delegate the limited stocks of electronic components.

For now all we can do as consumers is sit and wait for Apple’s next big move. Will they risk stock outs or move quick to find a new vendor to facilitate the manufacturing process of the iPad 2 and with that, charge higher prices for their products.

Sources:

http://www.reuters.com/article/2011/03/18/us-japan-quake-companies-idUSTRE72H22320110318?pageNumber=2

http://www.msnbc.msn.com/id/42141369/ns/business-us_business/

http://news.cnet.com/8301-13579_3-20044479-37.html