Today was a normal day. Placing client orders, getting quotes, and answering phones until…..I requested a quote on USB drives to lock-in a price for an order. The client regularly orders them and not realizing that this wasn’t like any other day, I was surprised to see an unusual response from my supplier.
30-50% Increase Overnight in flash memory prices
“The devastating earthquake that struck Japan last week has caused a severe price increase in flash memory (the key component in USB drives). Fears of a supply shortage in the near future are driving up spot prices all across the world. Our factories in China report prices have increased 30-50% overnight, and in most cases chip supply is not even available. There are still a lot of unanswered questions about the situation and much is in flux. Our management team is meeting this morning to finalize the best strategy to help our distributors. We’ll post another update today with more information as it develops. Rest assured we are doing everything possible to reduce the effect to you and your customers.”
Fasten Your Seat Belts for the Roller Coaster Ride
The next response posted on their website is:
“Current market pricing and availability is still in flux. We believe that information regarding chip availability and pricing will be available to us within the next 24-48 hours. Once this information is available we will send updated pricing to you. While we wait to get this information we are not able to honor any previous quotes or pricing on either in-stock or overseas orders. If you place an order with us it will be inputed into our system and we will contact you with price and timeline once it is available. Further reading regarding the reason for the price surge: Many of you might be asking, if USB drives are made in China how does the earthquake in Japan affect prices? There are many factors at play but most notably it is the short-term fear of memory chip sellers that the supply will dry up. The market is fearing that the chips will become more scarce because of the importance of Japanese companies in the memory chip business. Toshiba is the second largest produced of flash memory and they are located in Japan near where the earthquake struck. Reports have surfaced that the majority of Toshiba’s operations are in tact however many of their suppliers of raw materials have been negatively affected. One example is a silicon wafer supplier by the name of Shin-Etsu Handotai, which is located at the epicenter of the quake. Shin-Etsu Handotai produces 22% of the world’s silicon wafers. Their facility was shut down and although they will be operational later this week it will take them up to two months to regain full capacity. This will create market volatility and it is these types of scenarios that are driving fear in the chip industry and driving up prices.”
As with other promotional product distributors, we depend on our suppliers to keep merchandise in inventory or available to fill our customer requests. When a natural disaster of this magnitude shocks the world and devastates the economy of a country, the ripple effect will affect more than just the lives and economy of people in Japan. Here in the US we will feel it on many fronts.
Our prayers and best wishes are being sent to Japan as they live through this unspeakable tragedy.