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updated 07:10 pm EDT, Thu March 17, 2011

Toshiba, Mitsubishi, others hard-hit

[Updated with new information] While of less concern overall than the terrible loss of human life and ongoing disaster, the earthquake and tsunami which hit northern Japan on March 11th could create significant component delays for the iPad 2 and iPhone 4, claims Piper Jaffray analyst Gene Munster. Asian contacts reportedly say that the production status of Apple's Japanese suppliers is changing by the hour, and that none of them can definitively detail the damage they've suffered or when production will start up again. Two companies in particular are thought to be especially important: Toshiba and Mitsubishi Gas Chemical.

Mitsubishi is believed to be Apple's main supplier of BT resin, used in printed circuit boards. The company has temporarily shut down to gauge earthquake damage. Stopped under similar circumstances is Toshiba, which supplies about 40 percent of global flash memory, including a chunk reserved for Apple's iOS handhelds.

IHS iSuppli adds that the iPad 2 includes DRAM from Elpida Memory, an electronic compass from AKM Semiconductor, and the system battery (which is assembled in China, but supplied by Apple Japan), all of which are made in the country. In addition, the improved glass of the iPad 2 (compared to the original iPad) is thought to be coming from Asahi Glass Company, also located in Japan. While some of these components are relatively easy to source elsewhere, the special glass, compass and battery would be very difficult to replace.

Even though some of the companies involved (such as AKM) report that their own facilities suffered little or no damage, logistical issues affecting the entire country are likely to cause supply problems for weeks to come.

Component delays could continue until the end of June, says Munster. At the same time, Apple may be able to avert their full impact as a result of having long-term supply agreements with several vendors. "This strategy has proven to be an effective way for Apple to leverage its balance sheet and its position as one of the largest buyers of many of the components it uses; moreover, this strategy may prove particularly helpful if supply is limited and pricing increases," the analyst writes. "Finally, we believe Apple buys futures on important components, which will help offset near-term pricing swings. Our conclusion is that Apple is well positioned to suffer proportionally less than its competitors."

The largest financial impact on Apple may therefore be reduced profit margins. Component prices are on the rise as a result of Japan, and may trim Apple's margins in the second half of 2011. The one significant hit to revenue could come from a lack of sales in Japan itself, which Munster estimates might knock $202 million (1 percent) off of March quarter estimates. Theoretically, if there were no sales at all through the first half of the next quarter, the impact might be about $563 million, or 2.7 percent.

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