Maybe Japan is not as crucial to the global supply chain as those first weeks after the earthquake made it seem.
Consider the case of STMicroelectronics, Europe’s giant in the semiconductor business, which buys silicon wafers, chemicals and chip-packaging components from Japan.
STMicroelectronics has more than $10 billion a year in sales. Its major customers span a variety of industries — consumer electronics, autos, mobile phones and computers — and include Apple, Bosch, Hewlett-Packard, Nokia and Sony Ericsson.
After the earthquake and tsunami struck Japan in March, STMicroelectronics, like many global companies that buy parts and materials from Japan, quickly set up a crisis task force to assess the health of its supply network there. But the sense of crisis gradually passed. When necessary, suppliers outside Japan have been lined up, and the company’s production has not been disrupted.
And even though STMicroelectronics’ sales to Japan — about 4 percent of total revenue — will decline this year because of lower demand, “it is going smoother on the supply-chain side than we had thought,” said Carlo Bozotti, chief executive of STMicroelectronics.
The big European company’s experience is widely shared. More than two months after the disaster, any lingering impact on industries outside Japan from shortages of crucial supplies is limited. Beyond their concerns about a very short list of components, like certain automotive microcontrollers, companies around the world are cautiously breathing easier.
“The global supply chain has been able to weather the storm,” said Hau Lee, a professor at Stanford University’s graduate school of business. Barring further unexpected shocks, Mr. Lee said, “This has not been as bad as most people initially worried it might be.”
The resiliency of global supply networks and quick action by companies are part of the reason. But another explanation was provided by a study published last week, led by Mr. Lee and Kevin O’Marah, a supply chain specialist at Gartner, an information technology research and advisory company.
Their report used data from a survey of 750 supply chain managers across a spectrum of industries worldwide, sponsored by SCM World, a professional organization and Web site. As it happens, the survey was done in February, shortly before the quake and tsunami. It found that Japan, despite being the world’s third-largest economy (behind the United States and China), plays a relatively small role in the global supply chain.
The supply managers gave a telltale sign when asked to name the most important source of supply of manufactured parts and materials outside of the corporation’s home country. They were then asked to name their second and third most important nonhome source.
China was the leader, with 37 percent of the managers saying it was their leading source beyond the home nation. Next came the United States with 20 percent, followed by Germany with 7 percent. The same order was evident in the combined totals.
Japan fell well down the list, tied for eighth with Canada.
“What’s remarkable is how relatively isolated Japan is,” said Mr. O’Marah, an author of the report. “It’s far less integrated into the world’s manufacturing supply chains than you would expect, given the size of Japan’s economy.”
Another supply-chain specialist cautioned that the country survey data may understate Japan’s role. China’s rise as a manufacturer has tilted toward low-cost assembly operations, which often rely on Japan for important components, said Hal Sirkin, a senior partner at the Boston Consulting Group. “There is a Japan-inside-China element that might be missed here,” Mr. Sirkin said.
Japan specialists are likely to find the survey data — and Japan’s modest place in the global supply network — more revealing than surprising. Japan’s manufacturing prowess and global competitiveness are focused in a few industries, like automobiles and consumer electronics, they note. In those industries, the traditional Japanese model has been that a supplier would sell almost exclusively to one large manufacturer, like Toyota or Nissan.