Sony’s Camera Chip Factory Halts Production After Japan Temblor; AIR Comments

By Takashi Amano | April 15, 2016

The earthquake in southern Japan that killed nine people, damaged buildings and derailed a bullet train also halted production at a Sony Corp. camera-chip factory, a key part of the global smartphone supply chain.

The plant in Kumamoto on the southern island of Kyushu is still being inspected, Sony said. The strength of the earthquake, as well as persistent aftershocks, are raising the risk that it will take time to restore operations, Kenichi Saita, an analyst at Mizuho Securities, wrote in a report.

Still, he said he doesn’t expect the earthquake to have a major impact on camera-chip supplies, given current demand and Sony’s ability to shift production to other factories in Japan.

“We expect components for upcoming high-end smartphones to come from the Kumamoto factory, so there is concern on the impact on production and shipments,” Saita wrote.

The Kumamoto plant, which started operating in 2001, makes CMOS sensor chips that turn light into digital signals — a key component in digital cameras and smartphones such as Apple Inc.’s iPhone. Any disruption to the supply of digital-imaging chips could cause production delays and lost sales for manufacturers.

“We are checking into extent of damage and when we can restart,” said Haruka Kitagawa, a spokesman for Sony. “There hasn’t been major damage to the building.”

Sony halted production and evacuated the factory following the quake, which struck Thursday night. There were no reports of damage to Kyushu Electric Power Co.’s Sendai nuclear reactors, the only operating plants in Japan. A bullet train carrying no passengers derailed near Kumamoto station.

The shares of Tokyo-based Sony fell 3.2 percent to 2,395 at the close in Tokyo on Friday. The Nikkei 225 Average fell less than 1 percent.

[Editor’s note: Catastrophe modeling firm AIR Worldwide reported that the “strong and shallow” Kyushu earthquake was centered near the town of Mashiki in Kumamoto Prefecture, about 1,300 km (800 miles) southwest of Tokyo.

The United States Geological Survey (USGS) estimated the intensity of the initial temblor at Magnitude 6.2, while the Japan Meteorological Agency (JMA) estimated a M6.4 temblor, AIR reported. The depth has been initially estimated by the USGS as 23.3 km (14.4 miles) and by the JMA as 10 km (6.2 miles). Shaking started modestly, grew more violent, and lasted about 30 seconds, AIR said.

Damage and casualties from the area have been reported with houses flattened and fires started. (According to initial news reports, nine people have been killed).

“Roads have been damaged, and at least 10 buildings have collapsed in Kumamoto City, the capital of the prefecture. Elsewhere, large cracks have been reported in several structures. Walls of some houses have collapsed in the city of Ueki, and part of a city hall ceiling fell. Gas and power outages have occurred in areas close to the epicenter,” AIR said.

Buildings in Japan are predominantly wood, steel, or steel-reinforced concrete, according to AIR, while residential exposures are dominated by single-family homes, nearly 90 percent of which are of wood construction.

Japanese apartment complexes usually made of steel or steel-reinforced concrete; only about 24 percent are of wood construction, AIR said.

Wood is even rarer in commercial buildings, only used for about 12 percent of the building stock with most of them being steel or steel-reinforced concrete, the modeling company said, noting that small industrial building stock is primarily of steel or light metal with about 20 percent made of concrete.

“Japan experiences around 20 percent of the world’s most powerful earthquakes, but its rigid building codes and their strict enforcement mean that powerful tremors frequently do little damage, at least to engineered structures,” said Dr. Mehrdad Mahdyiar, vice president at AIR Worldwide. “However, as initial reports of this event confirm, vulnerable structures still exist.”]

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