THE prices of cameras and LCD TVs surged in the Chinese domestic market after global electronics giants such as Toshiba and Sony were forced to halt or curtail operations at dozens of factories in Japan following the devastating earthquake and tsunami two weeks ago.

The disaster has acutely affected upstream sectors of the electronics industry, including chip, memory, panel and other components. Though names like MCU (micro-controller units) or ACF (anisotropic conductive film) are not commonly known to most people, they are essential parts of cameras, computers like the iPad 2, game consoles, televisions and cars.

"It's no doubt both a natural disaster and also an industry disaster," said David Wang, president and chief executive of Semiconductor Manufacturing International Corp, the biggest made-to-order chip maker on the Chinese mainland. "It will influence the industry with aftershocks in the long term."

Besides direct damage from the earthquake and tsunami, power supplies and logistical networks have been impaired and will need time to recover. The impact of the disaster will last for one month or even one quarter, industry insiders said.

Generally speaking, production of electronic components requires huge power and water resources, and high standard of clean room air - factors now difficult in many regions of Japan.

In 2010, electronic equipment output in Japan accounted for 13.9 percent of the global market. Integrated circuit output alone comprised more than 20 percent, according to iSuppli, a United States-based research firm.

The fallout from the earthquake and tsunami has affected facilities and production of LCD (liquid crystal display) panels, memory components, chips, MCU and power devices, which are used widely used in consumer electronics for display, control and storage. Companies affected by shutdowns or slowdowns include Sony, Toshiba, Sharp, Fujitsu and Renasas. Foreign firms with operations in Japan, such as Freescale and Corning, have also been impacted.

LCD panels and chips

Toshiba and Hitachi said some of their Japanese LCD plants that manufacture small screens used in smartphones and automotive accessories would shut down for a month following the earthquake. Both companies cited damage to the plants, while power shortages are making matters worse.

At present, Japan provides 14 percent of global LCD panels, but the LCD panel industry won't face a supply shortage in the immediate future, industry insiders said. Whatever shortfalls occur at Toshiba, Sharp and Sony can be made up by components from South Korea-based Samsung and LG Display and from Taiwan-based AUO, the world's top three LCD panel vendors, insiders said.

A more serious problem is uncertainty of supply of chemical materials used in the production of LCD panels.

The disaster in Japan has also affected Taiwan-based LCD makers that purchase key materials from Japan.

"Our inventory can support about one month of production, but after that it would be difficult without supply from Japan," said Chau Wang, a senior official at Taiwan-based Chimei Innolux, the world's fourth-biggest LCD panel maker.

Chimei has invested US$1 billion on the Chinese mainland, including a plant in Ningbo, Zhejiang Province, and is expanding in the domestic market.

Production of LCD components in Japan, including glass subtracts, color filters and ACF, have been affected by the disaster, and that could impact LCD makers and the consumer electronics market globally, according to research firm DisplaySearch.

The tsunami and earthquake have affected about 25 percent of the global supply of silicon wafers, the most important material for chip production, according to iSuppli.

"For a short period, we are not affected," SMIC's Wang said. "But we are now closely watching related components supply from Japan." Shanghai-based SMIC imports key semiconductor materials and equipment from Japan, including photo-resisters and wafer substrates, Wang said.

Possible impact on the supply of BT (bismaleimide-triazine), a key material used in chip-package substrates, is also being closely watched by the industry.

The BT supply is dominated by Mitsubishi Gas Chemical, and about 90 percent of total BT-like materials come from Japan, according to research firm Red Tech.

Mitsubishi has shut down operations and given no indication about when they will resume, according to media reports.

Memory chips used in electronic devices, including smartphones and tablet computers such as the iPad 2, will also face a supply shortage because of production halts at Toshiba, the world's No. 2 flash memory chip maker. Toshiba comprises about 35 percent of the global flash memory market, second only to Samsung, according to iSuppli.

"The real impact of the earthquake will hit the industry this quarter and probably the next in areas such as price increases for memory chips and a supply shortage of related electronics items," said Kevin Gu, an iSuppli analyst.

Memory chips are a crucial part of consumer electronics, including Apple's iPad 2 that debuted in the US two weeks ago.

PCs and cameras

The professional digital single lens reflex camera market, which is now dominated by Japanese giants Canon and Nikon, has also been roiled by the earthquake.

In the Chinese electronics retail market, the price of cameras from Canon, Nikon and Sony shot up by from 200 yuan (US$30.50) to almost 1,000 yuan after Nikon announced it was stopping production of its flagship models D700, D3S and D3X.

The PC industry, too, relies on all kinds of components, from chips to memory and display. The prospect of a prolonged shutdown of electronics manufacturing plants is causing some concern among industry officials.

"In the short term there won't be much impact," Lenovo Chief Executive Yang Yuanqing told a conference in Shanghai last week. "We are more worried about the impact in the next quarter."

In February, Lenovo, China's biggest PC maker, and Japan's NEC Corp announced the establishment of a US$175 million joint venture that would boost Lenovo's revenue in Japan, the world's third-biggest PC market.