Sony Ericsson faces shortages of flagship phones

Disruption to component supplies after Japan's quake could hit new handsets

Sony Ericsson faces shortages of three new flagship cell phones after Japan's earthquake and tsunami disrupted supplies of key components, it said Tuesday.

"The smartphone industry relies on northern Japan as one of the largest producers of components and sub-components," said Bert Nordberg, president of Sony Ericsson. Nordberg was speaking in a conference call held to announce the cell phone maker's results for the first three months of the year.

The double natural disasters of March 11 and a subsequent nuclear-plant crisis caused massive disruption to businesses across most of east Japan. Some companies sustained direct damage to their factories while others have been unable to supply components due to problems with distribution, availability of raw materials or electricity shortages.

Businesses in the region are bouncing back, but some with heavier damage to facilities are still unable to resume production.

"A number of our suppliers and sub-suppliers are based in the area that was hardest hit," said Nordberg.

Sony Ericsson suffered little impact during the quarter because it had already secured most of the components it needed before the quake. However, supply chain disruption will be felt this quarter.

"For Q2 we see an impact on volume on the Xperia Arc, Xperia Play and Xperia Neo," Nordberg said, naming Sony Ericsson's three new flagship phones. "The reason being that these products contain high-end components such as cameras, LCDs and batteries."

The company recently launched the Xperia Arc and Xperia Play handsets in several markets. Limited quanties of the Xperia Neo also became available in China, but the broad launch of the smartphone has been shifted to the third quarter, said CFO William Glaser.

Sony Ericsson has informed cell phone carriers that it might not be able to meet orders.

Availability of components has begun to stabilize and Sony Ericsson has also turned to alternative suppliers for some products. The disruption could continue for some time.

"We anticipate that some of the supply chain will continue to be impacted by this disaster due to the damage to infrastructure and power constraints in Japan," said Nordberg. "The situation is dynamic, and at this stage it's too early to predict the medium term effect on our business."

(Mikael Ricknäs in Stockholm contributed to this story)

Martyn Williams covers Japan and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

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Tags business issuesPhonesconsumer electronicsSony Ericsson Mobile Communications

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Martyn Williams

IDG News Service
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