Electronics Production | March 28, 2011

Earthquake's impact on Automotive Infotainment Industry

The earthquake and subsequent tsunami have impacted the entire automotive industry supply chain in Japan, including the infotainment segment. This will have worldwide repercussions for the car electronics and infotainment businesses.
Japan in 2010 accounted for 35% of the USD 31.5 billion worldwide automotive infotainment electronics market. The country produced USD 11 billion worth of infotainment electronics during the year.

Japanese manufacturers in 2010 were responsible for 32% of the USD 22.9 billion worldwide market for automotive semiconductors. The country’s automotive chip production amounted to USD 7.3 billion in 2010.

Key automotive components produced in the affected area of Japan include semiconductors, liquid crystal displays (LCD) and optical sensors.

Chip suppliers are expected to encounter difficulties in obtaining and distributing raw materials and in shipping out products. This is likely to cause some disruption in automotive semiconductor supplies from Japan during the following weeks, if not months, particularly if suppliers rely on single-sourced solutions.

Northeastern Japan, the worst-hit area following the magnitude 9.0 earthquake and subsequent tsunami, is also home to many semiconductor wafer fabrication facilities. Renesas Electronics, Texas Instruments, Freescale Semiconductor and Fujitsu all are important suppliers to the auto industry and have been affected.

Tier 1 automotive infotainment electronics suppliers operating in Japan have reported varying impacts of the earthquake. However, many of these companies also have manufacturing operations in other locations such as Mexico, so the total impact of the production disruption on output is unclear.

Production facilities that depend upon a steady supply of components—especially microelectronics devices—will experience material and/or component shortages of varying degrees. As mentioned above, single source products will have a greater impact than those that rely on multiple sources.

A number of sources said that in many cases inventory can make up for immediate component needs and that most suppliers have a good understanding of how long it will take before they run out of parts. At this point, suppliers also are considering alternative supply sources, but this is not an option in some cases.

The global electronics business has been affected on a large scale and also will have an impact on the automotive industry worldwide in some shape or form and, therefore, could affect non-Japanese car original equipment manufacturers (OEM) as well.

The lengthy process of rebuilding or replacing the power generated by the nuclear reactors could complicate industrial output for months. Japan's automakers have stopped auto production at several plants to conserve the region's power. There has been a 10% reduction in electrical capacity, which will have some impact on the country’s capability to make products of any type.

For non-Japanese automotive OEMs, the impact of the earthquake on their supply chains could be delayed, as Tier 1 manufacturers assess their supplier situations. BMW, VW, Continental and Bosch all have removed their expatriate employees from Japan. This has an effect on productivity in Japan, and some ongoing programs are likely to be seriously interrupted—if not canceled altogether.
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