Japan’s Troubles Hit Home in IT Planning

Even as my thoughts are with the people of Japan as they continue to battle repercussions from the earthquake, tsunami, aftershocks and nuclear reactor problems, it’s hard not to be struck by the disruptive implications all around the globe. And more certainly lie ahead.

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In manufacturing, supply chain and distribution, delayed product deployments and increased costs for businesses in every geographic region are already being felt. And the most immediate hit is in tech.

Consider this: In 2010, Japan represented 10.2 % of worldwide data processing revenue and 16.5% of global consumer electronics equipment factory revenue, according to the IHS iSuppli market research firm.

Even if company factories were spared earthquake and tsunami damage, the country’s rolling blackouts are sure to wreak havoc with production floors and cause problems throughout the supply chain.

“Suppliers are likely to encounter difficulties in getting raw materials supplied and distributed and shipping products out. This is likely to cause some disruption in the semiconductor supplies from Japan during the next two weeks,” IHS iSuppli predicts.

Some of the components and electronics manufactured in Japan: LCD panels and their parts, semiconductors, NAND flash and DRAM. In fact, companies headquartered in Japan ranked No. 3 in semiconductor production among the world’s major chip manufacturing regions, according to IHS iSuppli.

Toshiba, which produces NAND flash memory, among many other components, noted on March 14 that it would be subject to factory outages due to restricted power use.

And as such announcements multiply, IHS iSuppli notes that pricing also is being affected. For instance, the firm reports spot-market DRAM pricing is surging, rising by as much as 7% from March 11 to 14.

So, what does this mean to IT and finance? That major data center build-out you were planning could be delayed because of a component shortage. And the building construction slated to include a range of state-of-the-art technologies made in Japan might cost more as supply is challenged.

Thus, IT and finance should convene a meeting of stakeholders of any new projects involving large technology purchases, and determine what the impact of the situation in Japan might be. This will help determine if the project can be delayed to avoid a potentially higher cost, or if budgets need to be adjusted to account for an increased price or alternate sourcing. Such communication could help save your company from being blindsided down the road when products are either unavailable or too costly to procure.