Supply-chain woes hit more Sony plants

TOKYO Tue Mar 22, 2011 7:22am GMT

A Sony logo is pictured at an electronic shop in Tokyo February 3, 2011. REUTERS/Kim Kyung-Hoon

A Sony logo is pictured at an electronic shop in Tokyo February 3, 2011.

Credit: Reuters/Kim Kyung-Hoon

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TOKYO (Reuters) - A shortage of parts will force Sony Corp (6758.T) to cut production or suspend output at five more plants in Japan following the country's catastrophic earthquake this month that has hit the global supply chain.

Global electronics and autos seem to have been most affected by the turmoil, but in an illustration of how the ripples are spreading, global miner Rio Tinto (RIO.L) warned the disruptions posed a threat to its expansion plans.

More than 10 days after a 9.0 magnitude earthquake and 10-metre tsunami struck the northeast of Japan, manufacturers are struggling to get back up to speed as factories grapple with a lack of components, power cuts and damage to infrastructure.

Such is Japan's position in the global supply chain that companies from Apple Inc (AAPL.O) to General Motors Co (GM.N) and Nokia (NOK1V.HE) are feeling the impact.

Toyota Motor Co (7203.T), the world's largest automaker, said all 12 Japanese assembly plants would remain closed until at least March 26 and it was not sure when they would reopen. Production lost between March 14-26 would be about 140,000 units. Toyota had been expecting to resume assembly on Tuesday.

Electronics giant Sony said more five plants, mostly in central and southern Japan, were hit by parts shortages stemming from the disaster and would close or reduce output until the end of the month.

"If the shortage of parts and materials supplied to these plants continues, we will consider necessary measures, including a temporary shift of production overseas," the company that makes the Playstation games console said in a statement on Tuesday.

The plants make such products as digital and video cameras, televisions and microphones, the company said in a statement.

A sixth plant in Chiba, north of Tokyo, was set to resume production on Tuesday, but it could be interrupted by the rolling blackouts that are affecting some areas supplied by Tokyo Electric Power (TEPCO) (9501.T), the operator of the stricken nuclear plant.

Including two factories only partially restarted last week, 15 Sony plants out of a total of 25 in Japan are currently affected. It has a total of 54 plants worldwide.

TECH CHAIN VULNERABLE

Japan's grip on the global electronics supply chain is causing particular concern.

The country produces around a fifth of the world's computer chips and exported 7.2 trillion yen (56 billion pounds) worth of electronic parts last year, research from Mirae Asset Securities shows.

"There are a huge number of little bits of the high-tech food chain which are done nowhere but in Japan," said Sam Perry, senior investment manager of Pictet Japanese Equity Selection Fund. "Nobody else has the quality or the consistency, and in some cases the technology to do it."

Japan dominates with the supply of LCD film and sealants for semiconductors, among other areas, Perry said.

"You simply can't do high-tech without Japan."

Camera and copier maker Canon Inc (7751.T), which has suspended all of its domestic camera production until at least Thursday, said one of the problems at its plants in southern Japan was a lack of gasoline which was affecting distribution of products and stopping staff getting to work in areas like the island of Kyushu, where train services are minimal.

Nikon (7731.T), which makes cameras and precision equipment, said it expects to resume production at all its north Japan plants by the end of March, but warned power cuts and shortages of parts could make a return to full production levels difficult.

Renesas Electronics Corp (6723.T), the world's No.5 chipmaker, restarted operations on March 19 at a semiconductor plant in Yamagata prefecture, in northwest Japan, a company spokeswoman said on Tuesday.

After the restart, production at six of the firm's 22 factories in Japan remains suspended, Renesas said.

RIPPLES SPREAD

Rio Tinto, the world's second-biggest iron ore miner behind Brazil's Vale (VALE5.SA), is worried the disaster will disrupt supplies of mining equipment, tyres and components, which could set back some of its expansion plans.

"The impact of the Japanese earthquake and tsunami have been many and diverse and they affect us," Rio's head of iron ore Sam Walsh told an industry conference in Perth.

"Some steel mills have suspended operations and suppliers of heavy equipment, such as Hitachi, have been impacted," he said.

Hitachi Construction (6305.T), Japan's No.2 maker of earthmoving equipment, said five plants in Ibaraki Prefecture, north of Tokyo, were closed after the quake. Three have at least partially reopened but there is no timetable as yet for re-opening the other two.

Tsunami damage to the nearest port means Hitachi is shipping some products from Yokohama, near Tokyo.

Car makers are also struggling to get production lines restarted.

On top of Toyota's delays, Honda Motor Co (7267.T) (HMC.N) was also extending its production suspension until Sunday from Thursday. A fifth of Honda's top Japan-based suppliers affected by the earthquake have said it will take "more than a week" to recover, the company said late on Monday.

(Additional reporting by Junko Fujita and Nathan Layne in TOKYO and James Regan in PERTH; Writing by Lincoln Feast; Editing by Neil Fullick)

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