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Global Political Economy uk

Buy custom Global Political Economy essay uk

In electronics, Japan still matters

An article posted by Einhorn Bruce on March 17, 2011 noted that in the global technology industry’s pecking order, the Japanese consumer electronics companies surrendered their top spot a long time ago to more nimble competitors. The article claims the competitors are such companies like Apple and Samsung electronics. Einhorn noted that although many of Japan’s chipmakers struggled, their competitors in such countries as Korea and Taiwan thrived. Meanwhile, the article claims that many of the marketing executives around the world at the major multinationals turned their attention to China and India; the new world’s economic powers. This is a big contrast as for many years; Japan was largely seen as an afterthought but now is seen as a declining power whose population is also aging.

Japan was hit by the March 11 earthquake. Interestingly though, that earthquake provided a rather rude reminder that when it comes to global electronics industry supply chain, Japan is still a force to reckon with. Japan’s factories produce about 20 percent of the world’s semiconductors and a further 40 percent of all electronic components. An example that Japan is one of the biggest forces is that Japan’s Mitsubishi Gas Chemical and Hitachi Chemical combined produce almost all of the world’s BT resin. BT resin is a raw material used in chip packaging and Hitachi Chemical has about 70 percent market share for a type of chemical slurry which is used by semiconductor production of polishing chips.

This should worry Tech executives and investors about a prolonged shutdown of any production of the above materials in Japan. This is because of many factories in Japan were closed after the earthquake and there was no clear sign of how much damage they had suffered or at when they might re-open. Of course big chipmakers like the Taiwan semiconductor Manufacturing Company from Taiwan can keep between four to six weeks of supply so uncertainty about maintaining supply from Japan is not a problem; at least for those six weeks. An analyst in Hong Kong with Samsung Securities, Warren Lau contemplated that all the Japanese companies were not able to give an estimation of when they were able to resume production. He further warned that there could be some destruction in the supply chain that was likely to cascade down to affect companies that make use of these chips for production citing Apple as an example. This shows that people and indeed companies were getting worried that if production in the Japanese industries stalled, there could be bigger productions problems in those industries that use the chips in production affecting not only Japan but the world at large.

One of those companies that could feel the pain sooner than other companies was identified as Nokia. Nokia is a major purchaser of Japanese components for mobile phones. Thus the fear was that Nokia could miss these products mainly because the region that was hit by the earthquake tsunami and the nuclear accident was the home to many manufacturers of those chips used by Nokia. According to a report by the Barclays Capital, this interprets to a disaster that was likely to hit the handset industry most than any. The report said that for Nokia to find another source of the material if the disruption to the supply chain continued for long was likely not an easy thing. A Barclay’s analyst contemplated that since the struggling Finnish company’s declining market share had reduced its once legendary ability to produce alternative supply.

Lastly, people are waiting to see as to when power was to come back at these Japanese factories as most of the companies like Nokia and Apple try to look for back up suppliers. The article noted that in some cases though, there are not viable alternatives that are able to produce in the scale that the Japanese companies did and as such companies like Nokia need. Samsung’s Lau noted that the shortfall of supply will be so huge that these companies (the like of Nokia and Apple) had to make difficult decisions.       

My opinion

The world’s focus may have shifted to such strongly emerging economies like China and India but in this case the author tries to remind us that Japan is not out- at least not now or in the near future. Japan has been and still is a force to reckon with especially when it comes to electronics. A classic example to show this is that Japan alone produces almost entirely of BT resin as Mitsubishi Gas Chemical and Hitachi Chemical combined produce almost all of the world’s BT resin. BT resin is a raw material used in chip packaging and Hitachi Chemical has about 70 percent market share for a type of chemical slurry which is used by semiconductor production of polishing chips. Thus without Japan the production of such important gadgets that make use of semiconductor chips like Nokia and Apple will stall after a short while affecting the world in one big way. In fact this is clearly shown when a China Daily reported that, “Not only do Japanese companies position it (China) as a manufacturing base, more importantly, they regard it as a very important consumer market.” This shows that even though China has edged Japan at the second spot, they still reckon that Japan is a force that cannot be assumed.

Summary

  • In the global technology industry’s pecking order, the Japanese consumer electronics companies surrendered their top spot a long time ago to more nimble competitors like Samsung electronics and apple.
  • Einhorn noted that although many of Japan’s chipmakers struggled, their competitors in such countries as Korea and Taiwan thrived and many of the marketing executives around the world at the major multinationals turned their attention to China and India; the new world’s economic powers. This is a big contrast as for many years; Japan was largely seen as an afterthought but now is seen as a declining power whose population is also aging.
  • But a rude reminder that Japan is still a force to reckon with in the world especially in the electronics industry was when Japan was hit by the March 11 earthquake. Interestingly though, that earthquake provided the reminder that when it comes to global electronics industry supply chain, Japan is still a force to reckon with. This is because Japan’s factories produce about 20 percent of the world’s semiconductors and a further 40 percent of all electronic components and almost all of the world’s BT resin used in chip packaging.
  • Of course big chipmakers like the Taiwan semiconductor Manufacturing Company from Taiwan can keep between four to six weeks of supply so uncertainty about maintaining supply from Japan is not a problem; at least for that six week. But analysts warned of some destruction in the supply chain that was likely to cascade down to affect companies that make use of these chips for production citing Apple as an example. Tech executives and investors should be really worried about a prolonged shutdown of any production of the above materials in Japan.
  • A Barclay’s analyst contemplates that if the shutdown at the Japanese factories continued for a long time, then some companies that make use of the chips will be seriously affected citing Nokia as an example. The analyst noted that Samsung’s shortfall of supply will be so huge that these companies (the like of Nokia and Apple) had to make difficult decisions. This showed the muscle of Japan in the electronics field in the world.       

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