Fitbit’s Supply Chain Strategy Leverages Cognitive Sourcing to Manage Costs
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It has been a couple of weeks since double earthquakes hit the Japanese island of Kyushu in the Kumamoto prefecture, self-named as Japan’s Silicon Valley. The two earthquakes, one registering 6.5 magnitude followed by the main 7.3 magnitude event, are unusual in that they occurred in a two-day time frame.
Additionally significant: 1,000 aftershocks continue to affect the area, according to the Japan Times. The Kumamoto prefecture, which accounts for approximately 25 percent of Japan’s semiconductor manufacturing output, according to Reuters, is an important area for chip manufacturing, particularly for automotive electronics, as well as image sensor (CMOS) chip manufacturing in addition to other electronic components and industrial products.
Supply chain concerns, beyond the humanitarian impact, initially included the impact on transportation systems given that air, rail, and highway closures were implemented. To date, all major transportation operations have resumed, although some secondary roadways and rail lines require repair from landslides and fissures. One lingering question is to what extent the global supply chain will be affected given that there are structural and equipment damages to manufacturers and their subcontractors.
While the actual impact is still being assessed, the supply disruption from the wider network of subcontractors, whose production has been significantly affected, is a major concern. Although the impact on the broader electronics distribution supply chain is not at the levels seen in the aftermath of the 2014 Hynix fire, nor the 2011 disasters in Japan and Thailand, the impact on the automotive supply chain is significant delays and low visibility into production forecasts, while damage assessment continues and full facility production dates are not certain.
Among the global component companies that have reported on their status, Rohm has officially released no effects to production occurred; Texas Instruments and Mitsubishi Electrics have not reported damage. Renesas, which is a major supplier to local automotive OEMs including Toyota and Honda, recommenced step-wise manufacturing production in Kumamoto.
Renesas disclosed that some subcontractors have sustained greater damage affecting its production, but that subcontractors are moving manufacturing to other locations.
Sony has issued a public statement regarding its major manufacturing facility for image sensors for digital- and security-cameras, as well as micro-display devices. Sony gave notice of a delay in reporting its quarterly forecasts due to ongoing assessments of damage and production schedules and subcontractors’ facilities that have also been damaged. The impact to the digital imaging sector and CMOS chip sourcing remains to be determined.
The automotive industry is facing more significant disruptions than general electronics. Bridgestone, Toyota, and Honda are among the global automotive OEMs who continue to suspend at least some of the manufacturing in Kumamoto. Given the significant increase in automotive electronics, this once niche sector is playing an increasingly important role in the overall electronics industry’s volume sales, meaning that negative production will also impact the broader electronics industry.
Until the assessments of the various facilities at both Tier 1 and other subcontractors have come through, the supply chain continues to be faced with speculation. Quietly, some supply chain experts and analysts are concerned that the impact of the recent Japan earthquakes on the automotive industry will actually be historically significant and that disruptions could prove to have a real impact globally for automotive manufacturing and production.
Similarly, in regard to the semiconductor and electronics industry, supply chain analysts and experts have anonymously commented on some activity and positioning around select component classes, but are not seeing the recent events as having a major impact on the global electronics supply chain writ large. What the actual situation is and who will be affected depends on the next round of news out of Japan.
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