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S. Korean firms keeping tabs on fallout from Japan quakes

April 18, 2016

SEOUL, (Yonhap) — South Korean companies are closely monitoring the impact of the recent earthquakes in Japan on the local and global manufacturing sectors as they have halted operations of major Japanese plants, industry sources said Monday.

A magnitude-6.5 earthquake hit Japan’s Kumamoto region Thursday, followed by a magnitude-7.0 tremor just 28 hours later. The temblors killed at least 42 people and injured some 1,500 people.

The earthquakes have also disrupted supply chains of major manufacturing companies in the world’s third-largest economy, suspending production at key auto, electronics and refining plants.

“We are deeply sorry for the earthquakes in Japan,” an industry source said. “The business community is keeping close tabs on what impact those quakes would have on the local manufacturing industry.”

That’s because most Japanese manufacturing companies are in competitive or cooperative relationships with South Korean companies in the global market, he said.

The domestic business community is trying to assess only any impact of the earthquakes on Japanese manufacturers’ exports since few South Korean manufacturing companies have entered the Japanese market, the source added.

The recent quakes have reportedly forced Japanese carmakers, electronics companies and refineries — including Toyota Motor Corp. and electronics heavyweight Sony Corp — to suspend production at some plants due to disrupted supply chains.

This is not the first time that Japanese manufacturers have been hit by earthquakes. A number of manufacturing companies suffered significant damage following the 2011 quake.

This file photo, taken on April 16, 2016, shows a road in the Japanese prefecture of Oita being blocked by a landslide following a powerful earthquake. (Yonhap) This file photo, taken on April 16, 2016, shows a road in the Japanese prefecture of Oita being blocked by a landslide following a powerful earthquake.

Although the Kumamoto quakes will inevitably disrupt production to some extent, they are unlikely to deal a fatal blow to Japanese manufacturers because their suppliers are located across the globe thanks to their efforts to diversify supply sources in the wake of the 2011 earthquake, experts said.

A South Korean car industry source said the latest earthquakes in Japan will likely have little impact on the world auto industry as Toyota alone has many plants in foreign countries.

But others said the suspension of Japanese transmission maker Aisine’s Kumamoto plant may have an impact on carmakers in South Korea that buy parts from the Japanese company, including Ssangyong Motor Co. and GM Korea Co., the local unit of U.S. automaker General Motors Co.

Local electronics companies are also closely monitoring any fallout from the earthquakes since prolonged plant suspensions could result in a minor change in the landscape of the global industry, a source said.

For instance, Sony is the global leader in the image sensor market with more than 40 percent market share, which could be affected by a plant suspension of one month or longer, he added. Sony is trailed by South Korea’s Samsung Electronics Co.

The quakes have halted operations of Sony’s Kumamoto plant, which account for some 14 percent of the company’s production capacity. Sony’s plant in Nagasaki, whose operations have been partially suspended, takes up 62 percent of its output.

Other watchers dismissed such a scenario, predicting Sony will be able to repair its damaged plant and resume production after a certain period of time.

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