Japan's quake aftermath poses supply risks for iPad 2

The aftermath of the Japanese earthquake may disrupt the flow of supplies for Apple‘s iPad 2, according to the latest intelligence from market researcher IHS iSuppli. Other electronics manufacturers could also see disruptions due to logistical problems.

Apple’s tablet uses several components manufactured in Japan. They include a hard-to-replace electronic compass, the battery, and possibly the advanced technology glass in the display. If these components are in short supply for weeks, Apple could see delays in getting its tablet into worldwide markets at a time when it desperately wants to outrun rival Android tablet makers.

The parts that come from Japan are the NAND flash memory that stores apps and other data on the iPad; that is made by Toshiba. Another component is the Elpida Memory’s dynamic random access memory (DRAM), which stores data such as running applications in the tablet’s main memory. AKM Semiconductor makes the electronic compass. Asahi Glass makes the touchscreen overlay, and Apple Japan makes the system battery.

While some of the suppliers said their factories were undamaged, the delivery of components from all of these companies is likely to be impacted by the transportation problems in Japan’s quake zone. Suppliers are expected to have trouble getting raw materials. Employees may be absent because of family issues or transportation problems. And the interruptions in electricity supply can play havoc with delicate chip-making processes.

On top of that, IHS iSuppli said that aftershocks will likely force chip makers to suspend manufacturing. Quakes ranging from 4 to 7 on the Richter scale will make it impossible to restart the factories, said Dale Ford of IHS. Equipment automatically shuts down when a quake surpasses 5.0, he said.

Apple is already in a big rush to meet stronger-than-expected demand. The company said this week that iPad shipments from the Apple Store have been delayed at least a week because of high demand. The good thing for Apple is that components such as NAND flash memory can be sourced from other suppliers such as South Korea’s Samsung or U.S. chip maker Micron Technology. The same goes for the DRAM.

The compass and glass supply could be harder to replace.

“The calibration of electronic compasses is tricky for a number of reasons,” said Jérémie Bouchaud, director and principal analyst for MEMS and sensors at IHS. “Compasses are sensitive to electromagnetic interference. Furthermore, the iPad 2’s compass works in close coordination with the tablet’s accelerometer and gyroscope. This makes it impossible to simply replace one manufacturer’s compass with another.”

The glass used in the iPad 2’s touch screen overlay is also a risk for Apple. While the supplier of this glass cannot be confirmed with certainty, IHS iSuppli said the likelihood is that Asahi Glass makes it. Asahi reported damage to two facilities.

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  1. [...] are slightly below what they expected. The iPad 2 faced production shortages since its release, and this year’s devastating earthquake in Japan certainly didn’t help to speed things [...]