By Miyoung Kim
SEOUL (Reuters) - The prospect of extended supply disruption caused by Japan's devastating earthquake drove prices for key technology parts higher on Tuesday.
If the supply chain is broken for even a few weeks, the impact could be felt in higher prices or shortages of gadgets such as tablets, smartphones and computers for months to come.
Japan is a dominant chip industry player, with around one-fifth of the world's semiconductor production.
From component makers to electronics firms and automakers, Japanese companies are keeping plants shuttered.
Even if damage to electronic production facilities turns out to be limited, power and transport disruption could result in significant shortages of some electronic parts and lead to big price increases, research firm IHS iSuppli said.
NAND flash memory chips used in the fast-growing mobile devices market, dynamic random access memory (DRAM), microcontrollers, standard logic, liquid-crystal display (LCD) panels, and LCD parts and materials could all be affected, it said.
Spot prices of NAND flash chips again increased on Tuesday, rising nearly 3 percent after a 20 percent jump on Monday, while DRAM memory chip prices gained 0.2 percent on top of a 7 percent rise on Monday, according to price tracker DRAMeXchange.
Kingston Technology, one of world's largest suppliers of DRAM and NAND memory, said some market reaction had been "of a speculative nature," but added, "there is a valid concern about the disruption to the logistics chain of some DRAM chip manufacturers outside Japan."
"In semiconductor production a temporary stop to the lines usually means that everything that was on the lines at that moment (and a production process takes several weeks) has to be discarded as junk," Kingston said in a statement.
Even if shipments of semiconductor parts were disrupted for only two weeks, shortages and their price impact would probably linger until the third quarter, iSuppli said.
Demand for NAND flash memory chips has been surging, led by mobile devices and tablets like Apple's iPad 2, whose sales are estimated at almost 1 million units.
"The mobile phone industry has been suffering from a component shortage. Now it seems it will be prolonged. Component prices will rise," Inderes analyst Mikael Rautanen said.
Taiwan's Wintek, which makes the touch module for the iPad 2, said it had more than two weeks of inventory left and the short-term impact was limited.
Apple Inc said on Tuesday it was delaying launch of its IPad2 tablet in Japan after the disaster, but it did not say it was due to supply problems.
Dale Ford, senior analyst at IHS iSuppli, said he expects that Apple has managed its supply chain adequately. "Other players who want to come into the (tablet) market competing with Apple, ramping up, they may find it a little more difficult."
Park Electrochemical Corp, which makes digital and microwave printed circuit material for telecommunications infrastructure, warned that many of the raw materials it uses come from Japan and that it could face supply chain problems at its manufacturing plants around the world.
The scramble is on to find alternative supplies. A source at Wintek said it was looking for secondary suppliers to replace Japanese ones. Taiwan is likely to fill some of the gaps, along with other producers including France, said Luo Huai-jia, vice president of Taiwan's electrical and electronic manufacturer's association.
Toshiba Corp, which supplies about one-third of the world's NAND flash memory chips, said it was still inspecting its System LSI factory in Iwate. The factory, which produces microprocessors and image sensors, was halted by the quake and tsunami. Toshiba could not say when it might reopen .
Others such as chipmaker Texas Instruments have warned of long delays at plants where it has suspended production, though it had managed to redirect 60 percent of their output to other sites.
Sony Corp said eight factories making, among other things, optical devices, IC cards, blu ray discs, chip equipment and lithium batteries remained closed.
ARM, the British company whose processor designs are licensed to 200 chipmakers, said the globalised nature of the industry meant it was too soon to tell the impact.
"It could end up being there is minimal overall impact, or there could be a key component somewhere along the line which means there are no iPhones," ARM's head of investor relations, Ian Thornton, told Reuters.