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Tech stocks fluctuate because of Japan disasters

March 14, 2011 7:23:36 PM PDT
Japan is the world's third largest economy, right behind America and China. The disasters in Japan led to a broad sell-off in the stock market. Japan's benchmark Nikkei 225 index fell almost 634 points or 6. 2 percent. The volatility of certain tech stocks is a reflection of the uncertainty facing companies that use semiconductors made in Japan.

Japan is an important source of semiconductors for a wide range of products. The best known are smartphones and music players. Those chips are also in the microwave ovens we use and even washing machines. But power outages and glitches in the transportation system have raised the spectre of manufacturing and shipping interruptions, just as new tablets and new Smartphones are coming to market.

"Disruption in the supply chain will slow down that production rate, which may delay the availability of those products on the shelves for consumers. That will ripple through the entire industry," said Semico Research President Jim Feldhan.

The cost of flash memory has already gone up between 16 and 20 percent. That's the solid state storage used by many MP3 players and a few notebooks and laptops.

HP's new CEO, Leo Apotheker, spoke to an investor conference in San Francisco. "This is a rapidly evolving situation," he said, "and it's difficult to determine at this time the impact to HP's business."

Analysts tell ABC7 News that most of Japan's semiconductor plants are hundreds of miles to the south of the earthquake epicenter. Plants, such as one operated jointly by Milpitas-based Sandisk and Japan's Toshiba, sustained little to no damage.

"Both transportation and logistics within the country, as well as the continuity of power, would be next and then over the medium term, looking into the continuity of raw materials and supplies that the factory relies on," said Sandisk Worldwide Operations Vice President Manish Bhatia.

Solving these issues will be important as prime production season approaches for holiday sales.

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