There is no denying that Japan is a major contributor to the global economy. In 2010, Japan accounted for nearly 9% of the world’s economic output and Japanese exports totaled $767.8 billion. This included 60% of the world’s silicon wafers (the building block of computer chips), where the shutdown of two factories due to the earthquake cut the world supply by 25%, and 90% of the world’s supply of BT Resin (a substance used to make printed circuit boards). Clearly this has huge implications for companies worldwide who rely on the island country for these and other materials. For now, strong inventories of these materials along with the quick ramping up and opening of other factories have helped. In other industries there was a more immediate impact.
One example is the auto industry. The immediate impact can be seen in both the car companies in Japan (Toyota (TM) and Honda (HMC) being two of the major players) where many factories where damaged by the quake but also on companies worldwide that depended on materials, mostly electronic, made in Japan. In the long-term however I see this as an opportunity for US car companies (for example Ford (F), General Motors (GM), and Tesla (TSLA)) as well as other players such as Chinese and Korean car companies, to take back some of the market share that Japanese companies have taken over the last decade. The earthquake will force many Japanese companies to focus their efforts on rebuilding domestically, giving companies from other nations an opportunity to gain some traction in emerging markets such as China and India. Furthermore, Japanese companies exported nearly nine million vehicles worldwide in 2010 and with factories temporarily idled there is an opportunity for outside competitors to steal some of this.
Japan is a major player globally and thus the earthquake and tsunami has had, and will continue to have major impacts in a wide range of industries. I think the auto industry is an especially interesting example and that investors thinking about making a move in this industry should consider both the short-term and long-term impacts this tragedy will have.