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U.S. tech industry braces for aftershocks from Japan disaster

With high-tech plants damaged and shuttered in Japan, tech could be in for big hit

March 17, 2011 06:00 AM ET

Computerworld - With Japan devastated by last week's 9.0-magnitude earthquake and tsunami, the business aftershocks may rock various parts of the tech industry for months to come.

As Japan deals with massive loss of life, a nuclear meltdown crisis, damaged roads, buildings and communities washed away, as well as rolling electrical brown outs and black outs, its manufacturing and economic abilities have taken a major hit.

And with Japan's technology business so intrinsically tied to the industry here in the U.S. and around the world, the business effects of this disaster will be wildly felt.

Since the disaster hit just as the U.S.-based technology industry is starting to come out of the dark days of the recession, Japan's problems could be a test for a lot of companies.

Every group, from the semiconductor industry to tablet makers, smartphone makers and even the automotive industry could feel this for the next six months to a year, say industry analysts.

Michael Palma, a research manager for IDC, said numerous problems hitting the Japanese tech sector all once, as well as the sheer scale of the problems, will slow the recovery.

"The workers, whether they're in a factory or in a management role, have to worry about family members. The infrastructure, as I understand it, is fairly well shut down," Palma said. "There are energy shortages so what energy there is is being sent to critical areas first. And with transportation... if companies can make the components, they may have a hard time getting them moving."

Questions are mounting: How flexible and quick will companies be to deal with supplies given the crippled transportation system? How will companies deal with a possible shortage of computer chips and components after manufacturing facilities were damaged or destroyed? How quickly can some companies move manufacturing out of Japan and to other sites?

[ See highlights: How Japan's disaster is impacting the tech industry ]

Charles King, an analyst with Pund-IT, said there are not many clear answers to the many questions right now.

"It's hard to call this one right now," King said. "Reports of damage to facilities are still being reported and it seems clear that the effects of the disaster on Japan's electrical grid will significantly impact and disrupt industries across the country."

"Early estimates suggest that disruptions could last six months or more," he said.

Dan Olds, an analyst with The Gabriel Consulting Group, said at this point companies are still trying to wrap their heads around the extent of the problems they're dealing with. "There was definitely damage to Japan's high-tech infrastructure, but even the companies who own the facilities don't know the true extent of their problems yet," Olds said.



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