http://www.ebnonline.com/author.asp?section_id=1059&doc_id=204963

As I had noted in my own website back in March 2011, the Japanese earthquake could have long-term impacts on the manufacturing of semiconductor chips in Japan and basically the entire electronics industry. Well, it appears it has all come true.

It was obvious that Japan’s chip manufacturing capability or even the entire electronics industry would be impacted. The news reports alone were enough to convince me the industry was looking at trouble but that was trivial compared to the misery the Japanese people were and still are dealing with.

Japan is one of the largest chip suppliers to the world and that is a problem. Japan has nearly 25% of the world’s manufacturing capacity. Bottom line, it is time to mitigate the risk to the global economy by diversifying the supply chain now.

Comments about countries like South Korea temporarily picking up the slack are short-sighted. Mexico is a possible location for chip manufacturing. The South American continent is another new location for electronic component manufacturing. South Korea is part of the seismically active Pacific Rim.

Comments about the resilience of the Japanese people have absolutely nothing to do with the wisdom of locating that much critical manufacturing in one of the most seismically active regions of the world.

Picking up the slack is important so I suggest we look at Israel, Germany, and the United States. These countries possess major facilities now and can ramp up over the next six months to meet demands on a long-term basis. From a short-term perspective, these countries will have little impact on chip supplies. Are prices going to rise? Yes. Are prices going to drop when manufacturing capacity is brought up to par? Probably not. Have you ever seen a product supplier ever drop its price unless it was for market reasons or through government demands? I have not.

There were economic reasons why Japan became such a major supplier of electronic components. I am not arguing against those reasons. I am addressing the “here and now”.

What the technology sector needs to do is to find new locations for manufacturing capacity; preferably locations less susceptible to natural disasters than the Pacific Rim.