Quick note here from BofA/ML, which is expecting widespread earnings misses thanks to the earthquake in Japan.
We expect to see tech company earnings misses materially in 2Q11 but even more broadly in 3Q11. The highly varied commentary from companies as to the expected impact of this disaster is attributable to (1) long production cycle times of upstream components/materials, (2) a multi-layered supply chain creates limited visibility to downstream companies, and (3) high barriers-to-substitute suppliers (due to long qualification and test times). Hardware companies have been the quickest to suggest limited impact from the quake, but appreciation of risk factors understandably increases towards the upstream end of the supply chain.
As for some specifics:
With only 1-2 months of raw wafer inventory at logic and memory semiconductor manufacturers, wafer suppliers need to ramp their underutilized crystal facilities to offset the 30% capacity loss/damage to 300mm capacity. However, until STABLE power is restored, risk of 300mm wafer shortages will continue to rise. Another potential bottleneck will be qualification at alternative suppliers, which typically takes 2-3 months (shorter for memory) depending on hot lot status and testing time needed. We see another potential bottleneck in BT-substrates since 80% is supplied by two Japanese companies – the larger one needs over one month to repair while qual/test could take 1-2 months. Our LCD team had indicated no significant disruption to LCD glass or ACF suppliers but logistics issues cannot be ruled. Production in the LED segment has not been affected directly but there remains risk of shortages of sapphire substrates, connectors or PCB substrates.
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