Full Recovery Soon From Japan Earthquake

All the high-tech equipment vendors and component suppliers whose operations were disrupted by the March earthquake and tsunami in Japan are expected to resume full production by September at the latest, completing in rapid time a recovery many initially thought would extend through the end of the year or even into next year. So states research firm {complink 7427|iSuppli Corp.}

The researcher estimates most of the companies that had facilities closest to the epicenter of the earthquake should complete their recovery by early September, joining the others that within weeks resumed full production as the industry pulled together to ensure smooth delivery of products and components.

This is good news for the entire high-tech market and also a testament to the industry's resilience in the face of punishing odds. By completing the recovery ahead of expectations electronics equipment manufacturers have positioned themselves to deliver on demand during the always strongest fourth quarter, when back-to-school and end-of-year holiday sales typically boost revenues and margins. What this also means is that the semiconductor market should be able to post mid-to-upper single digit growth for 2011.

According to the iSuppli statement:

    The timing of the recovery will be fortuitous. Following normal seasonal patterns, global semiconductor revenue growth will hit an annual crescendo in the third quarter, with a sequential rise of 7.4 percent. This compares to a 1.4 percent decline in the first quarter, a 2.9 percent increase in the second quarter and a 3.1 percent rise in the fourth quarter.

I expect some mop-up recovery operations will continue through the end of the year. Some facilities closest to the site of the tsunami will need continued support, and Japan's ability to meet energy demand has been curtailed by the damages to several nuclear facilities in Fukushima. iSuppli noted that certain industry segments, including the automotive and consumer markets, were more heavily hit than other sectors. These industries may continue to see some impact from the disaster through the end of the year, although these may be hardly noticeable.

iSuppli gave kudos to {complink 2149|Fujitsu Ltd.}, which it said was heavily impacted by the earthquake and the tsunami yet moved quickly to extricate itself from the effects and recovered quickly. Although the company had facilities close to the epicenter of the disaster, it had completed all recovery efforts and moved back to full production by June 9, several months ahead of iSuppli's expectations, according to the research firm. It turns out Fujitsu had years before implemented procedures that helped its recovery efforts, a lesson for the rest of the industry. As iSuppli noted:

    The main factor propelling Fujitsu’s fast recovery was the company’s disaster-response strategy implemented three years ago following an earthquake in Japan’s Iwate prefecture. The company operates semiconductor manufacturing facilities in various parts of the world, allowing it to pick up the slack if one region is hit by a disaster.

    Fujitsu also has an effective plan that can restore electricity, water and other utilities at disaster-stricken plants. Furthermore, the company in the past had installed equipment that could seismically isolate damage to semiconductor wafers, which succeeded this time in mitigating the impact of the earthquake.

Does this mean the electronics supply chain will deliver exceptional performance in the fourth quarter to boost sales strongly? Possibly. One thing is sure, though: Anyone blaming failure to meet forecasts on the Japan earthquake should expect to be grilled about it.

10 comments on “Full Recovery Soon From Japan Earthquake

  1. DataCrunch
    July 1, 2011

    Bolaji, considering what the country went through this is an amazing and inspirational outcome.   

  2. Ariella
    July 1, 2011

    It certainly is, Dave. Determination and good planning rather than excuse achieve great results.

  3. Adeniji Kayode
    July 1, 2011

    Great news Bolaji,Japan must have really made up their minds not to allow a setback despite the destructions experienced.

  4. Michelle
    July 2, 2011

    Yes, this is good news. It's great to see the recovery from such distruction. Thanks for the update.

  5. Clairvoyant
    July 3, 2011

    Good to hear about this recovery! However, I wonder what the status is with regards to the homes and living places of the population.

  6. elctrnx_lyf
    July 4, 2011

    Definitely a great come back by the japanese industries, this is one example that iterates the problems always make you tougher and stronger. So probably from now on these Japanese companies will have the best system in place to recover from any disaster.

    July 4, 2011

    I read today that the Japanese stock market had taken a 20+ % pummelling since the earthquake but the signs are there that the recovery is truly underway and if anything Japan will come out stronger than before.   In my own business I am seeing a lot more activity in Japan again, especially in those companies that do significant business with China.  Might be a good time to invest in Japan.

  8. Eldredge
    July 5, 2011

    It sounds like Fujitsu's distributed manufacturing stratregy relly helped them maintain production levels while they work on recovery at the damaged facility. Does anyone know if the damaged plant was hit by the tsunami in addition to the earthquake? In any case, it is amazing that they were back in production by June.

  9. Eldredge
    July 5, 2011

    While Japan's electronics industry seems to be making great strides, there has been some recent political fallout. AP reports that Japan's disaster recovery minister has resigned after making offensive remarks during a visit to Iwate.

  10. HM
    July 6, 2011

    Japan is an amazing country. Last day I read about the speed at which they are recovering. The Japanese Ministry of Economy Trade and Industry says that industrial production is up a good percentage (5.7 in May) when compared with the previous months. I think it is a fast recovery for a country that was hit by such a natural disaster.

    It also says rise is contributed by transport equipment, general machinery and chemicals excluding drugs. Also large and small passenger cars and large trucks are the main commodities supporting production growth.


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