Japan’s “likely” recession will hit CE

The Japanese earthquake and tsunami will “likely” push Japan into a “short and deep recession” affecting some Consumer Electronics sectors, according to a major report from investment bankers Morgan Stanley. The bank says Japan’s GDP will shrink by 1-3 per cent this year.

Morgan Stanley says that prior to the Japanese catastrophes the world was displaying “significant momentum and breadth with emerging markets motoring ahead nicely.” But life for many is now much more uncertain with supply chain disruptions perhaps causing more harm.

Specifically, the bank looks at Japan’s key business sectors. The report does not see too many problems in regards to telephony/communications handsets. Shipped stocks are good, with Ericsson (for example) having 69 days of inventory in its warehouses while Cisco has 37 days of stocks.

It is in the world of Semiconductors that there are real risks, says the bank, given that one particular factory (Shin-Etsu Handotai) supplies some 15-20 per cent of the world’s supply. “The recent capacity tightness has led the supply chain, including semiconductor companies, to build excess inventories. Consequently, we believe the long-term risk is limited as inventories give the supply chain time to find alternative sources, or local suppliers time to restart or shift production. In the intermediate term, we believe that there is risk for some wafer tightness,” says Morgan Stanley.

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