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The crisis in Japan is sending a shudder through the technology sector as companies and investors try to determine the impact of supply disruptions and possible shortages of key components.
A broad wave of selling Wednesday hit the stocks of Japanese tech firms as well as U.S. stalwarts such as Apple Inc. and IBM Corp. , as analysts downgraded firms and reduced expectations.
The Asian country is the world's biggest supplier of several critical technology ingredients, including the silicon used to make computer chips and a resin used to make printed circuit boards.
"The Japan earthquake and tsunami could result in significant shortages of certain electronic components, potentially causing pricing for these devices to increase dramatically," says Jonathan Cassell, editorial director at IHS iSuppli, a research firm in El Segundo, Calif., specializing in technology supply chains.
Sony Corp. , Texas Instruments Inc. and Hitachi Chemical Co. Ltd. are among the major suppliers that said they have closed down some operations in Japan as a result of last Friday's earthquake.
Shares of Sony have fallen about 14 per cent since the disaster. The Tokyo-based company has suspended manufacturing at eight sites and ceased operations at a ninth.
Analysts say one of the effects of the disruptions at Sony and Hitachi will be a shortage of lithium-ion batteries, used extensively in computer devices.
Shares of Texas Instruments have fallen 5 per cent since Friday. The Dallas-based chip maker said its plant in Miho, about 70 kilometres northeast of Tokyo, suffered "substantial damage" during the earthquake and will not be at full capacity again until September at the earliest.
Tokyo-based Mitsubishi Gas Chemical Co. Inc. suspended operations at a damaged plant, one of the world's biggest suppliers of materials for printing boards. "At present, it is impossible to estimate the losses that have been and/or might be caused by the earthquake and rolling blackout program," the company said.
Shares of both Apple and IBM declined 4 per cent Wednesday after analysts notched down their ratings. JMP Securities cut Apple to "market perform" from "market outperform," citing "notable deceleration" in sales of its primary manufacturing partner, Hon Hai Precision Industry Company Ltd. of Taiwan. Analyst Alex Gauna noted that the slowdown began prior to the earthquake, possibly due to increased competition from Google's Android software.
Sanford C. Bernstein & Co., meanwhile, trimmed its rating on IBM to "market perform" from "outperform," citing the stock's recent price gains.