Effects of Japan quake expected to slowly hit LI firms

The earthquake and tsunami that devastated parts of Japan on March 11 had high-tech industries in Long Island scrambling to figure out what would it mean for their businesses.

"The first thing we did when we woke up to the news on [that] Friday was we made sure all our employees and their families were safe," said Veeco Instruments chief financial officer David Glass. The Plainview-based firm has about 30 sales and service people based in Tokyo, who were fine, he said.

"The next thing we did was check on our suppliers," he said.

Veeco, which designs and manufactures equipment used to make light-emitting diodes, solar panels, hard disk drives and other devices, wasn't aware of any major disruption but is still reviewing the potential impact of the disaster, he said. None of the company's key suppliers' manufacturing facilities were directly affected, but finished components may use materials from many sources.

"Every company is faced with the same thing," he said. "In a few weeks these things will kind of come more into focus, but right now we're not seeing any issue."

Gary Lynch, head of supply-chain risk management at Marsh Risk Consulting in Manhattan, said some firms may not be aware of the sources of the semifinished components that go into the finished components they buy from their suppliers, where problems could arise.

"It takes a while for these businesses, especially as they're looking at their upstream suppliers, to even recognize that they have a problem, because it has to trickle through the supply chain," Lynch said.

The earthquake halted the production of a quarter of the global production of silicon wafers used to make semiconductors, according to the market research firm IHS iSuppli. iSuppli also reported that two Japanese companies that produce 70 percent of the world's supply of the main raw material for printed circuit boards stopped production.

Melville-based Comtech Telecommunications Corp. expects that there will be other sources for the Japanese-made components it uses.

"We've been focused on evaluating any potential supply-chain issues given that Japan does make a wide variety of parts and pieces that go into components, which are included in some of our products," said Comtech chief financial officer Michael Porcelain. "Most of these parts, in some cases they represent important pieces, but they're very low-cost components and they are generally available elsewhere."

Arrow Electronics, a Melville-based global distributor of electronic components, has posted links on its website from more than three dozen suppliers indicating the extent of the impact, if any, of the earthquake. Common problems in Japan ranged from power blackouts and transportation complications to a plant evacuation in Fukushima because of its proximity to the damaged Dai-ichi nuclear power plant.

Arrow has a global supply network that it can call on when a customer needs a component that may not be available from its usual source, spokesman John Hourigan said.

"If there is a shortage on any particular part, we're working from a base of 900 suppliers, and they have all of their own manufacturing facilities located all around the world, not just in that particular region," he said.

Fitch Ratings analyst Jamie Rizzo, who covers large U.S. high-tech companies, said that the high cost of doing business in Japan has led to the development of high-tech manufacturing in other areas like China, Taiwan and Singapore, which mitigates the impact of the disaster on those companies.

"The tech sector has become so agile over the last few years, where they have been very adept at moving to lowest-cost regions," Rizzo said. "If it happened in Taiwan, I think we'd be having a much different conversation."