HANGZHOU - Uncertainties are increasing for some Japanese-funded companies in China after the earthquake and tsunami on March 11 that struck northeastern Japan.
Challenged by disrupted supply chains and a halt in sales, the companies have begun to prepare for finding alternative suppliers of raw materials and parts and new sites for production, as well as exploring for new sales channels.
Corporate suffering after great earthquake and Tsunami
Some of the 7,000 Japanese-funded companies in east China's Jiangsu province are suffering from disrupted supplies of raw materials and spare parts from Japan and have postponed deliveries by eight to 10 days.
A string of the world's largest brands such as Panasonic, Sony, Toshiba and Toyota, have shut down factories in quake-hit areas and many workshops outside the areas due to power supply restrictions and halted transport. This has had an impact on supporting production plants in Jiangsu.
The province saw Suzhou Kintetsu Logistics' logistics system nearly paralyzed. Meanwhile, Canon's Suzhou operation, along with Hitachi Display, Akebono Brake and Fuji Film in the city, had their main supply of raw materials lingering in Japanese harbors.
Those companies having both their raw materials sources and target markets in Japanese areas near the epicenter of the massive earthquake are suffering in a more direct way. For instance, a company in Nantong, another processing base in Jiangsu, had more than $70 million in annual trade with Japan. It also had materials coming and going to Sendai. Since the earthquake and tsunami, the company lost contact with traders and producers in the city on the northeastern coast of Japan.
A few Japanese-funded companies in Zhejiang province, also in east China, are undergoing similar experiences.
In Pinghu of Zhejiang, which is now home to 100 or so Japanese-funded companies, NIDEC's local operation, which produces 70 percent of the total annual camera shutter supplies for global markets, is expected to have its products pile up in the coming week, as some of its major clients, such as Canon and Nikon, have suspended some production capacity in Japan.
Konno Shigeru, the president of NIDEC Copal Electronics (Zhejiang) Co Ltd, who witnessed the earthquake in Miyagi Prefecture of Japan 33 years ago, said that plants destroyed in the tsunami would be restored in one to two years. Most of his company's spare parts suppliers are located in Japan and some have said they had to postpone deliveries.
Counter-measures from firms and local governments
Amid such uncertainties, the Japanese spare parts suppliers for Wuxi Jieshi Battery transferred part of their production capacities to Wuxi of Jiangsu beginning March 14.
Also, Tsugami Precision Machine Tool (Zhejiang) Co Ltd has stepped up localization. Currently, it sells more than 80 percent of its products in China and buys more than 80 percent of its raw materials domestically.
Konno Shigeru said his company was searching for alternative products for raw materials and spare parts.
Jin Yongxi, who is in charge of human resources at another Zhejiang operation of NIDEC Copal, said that all of the raw materials, such as rolled steel and aluminum, used by the company come from Japan. The company will now consider turning to raw materials produced in Taiwan or the Chinese mainland.
Takeshita, who is in charge of daily operations with NIDEC Copal Electronics (Zhejiang), said that if it would take at least three months for his company's plants in Japan to resume production, the company would likely build new production facilities outside Japan, perhaps in China.
Zhang Dongge, a senior official with the management committee of the Economic Development Zone of Pinghu, said that it was imperative for Chinese materials and parts suppliers to improve their product quality to the criteria set by Japanese-funded downstream companies.
Special Coverage:China's economy feels effects of Japanese quake
Local governments are also trying to help Japanese-funded companies after the earthquake and tsunami.
Jiangsu has opened "green" channels at airports and ports for struggling Japanese-funded businesses. Convenient arrangements have also been made by local entry-exit inspection and quarantine authorities.
According to Zhu Min, the head of the provincial commerce bureau, local governments and human resource management authorities have found jobs for workers laid off from some Japanese-funded companies amid the production shrinkage.
