Intel: Japan Crisis Won't Hurt Chip Production

Both Intel and Qualcomm have announced that the current crisis in Japan will not disrupt processor production, as their operations are spread out enough geographically that the ongoing situation won't cause any foreseeable problems.

The news counters previous comments by analysts at Barclays Plc and UBS AG who speculated that shutdowns at Mitsubishi Gas Co would deprive various chipmakers of a much-needed chemical resin (Bismaleimide Triazine, or BT) used in the packaging process, thus causing a disruption in supply.

Currently Japanese producers of some key components and materials used in the electronics sector have no power following the 9.0-magnitude earthquake and the resulting tsunami that crashed onto the island nation on March 11, damaging factories and the transportation infrastructure. Japan is also dealing with damage to some of its nuclear power plants and the growing threat of radiation poisoning. Nearly half a million people are homeless at this point.

Qualcomm, at least, seems to have production under control. "Qualcomm has multiple, geographically diverse sources for supply as well as production processes specifically designed to enable us to mitigate disruptions in our supply chain," the San Diego-based company said in a statement. "We do not foresee any significant impact in our ability to supply product to our customers due to the events in Japan."

The company also added that it will make use of buffer stock and make adjustments to the near-term material mix in case the flow of BT is indeed disrupted. Meanwhile, Qualcomm stocks have fallen $2.50, or 4.7-percent, to $50.50 as of 4pm New York time in Nasdaq Stock Market trading on March 16. Intel stocks also suffered, falling 37 cents, or 1.9-percent, to $19.81.

Chuck Mulloy, a spokesperson for Intel, told Bloomberg that the company plans to keep its commitment to customers. "Our general rule is that nothing is sole-sourced," he said.

Analysts are already indicating that prices across the entire electronics sector may increase due to the disaster in Japan and the resulting ripple of economical disruption reaching out to Taiwan. Both nations supply a large amount of the world's semiconductors, NAND flash memory, DRAM parts and other computer components.

"While there are few reports of actual damage at electronic production facilities, impacts on the transportation and power infrastructure will result in disruptions of supply, resulting in the short supply and rising prices," analysts with IHS iSuppli said in a report March 14. "Components impacted will include NAND flash memory, dynamic random access memory (DRAM), microcontrollers, standard logic, liquid-crystal display (LCD) panels, and LCD parts and materials."

Market research firm Objective Analysis is expecting "phenomenal price swings and large near-term shortages" due to the aftermath of last week's earthquake.