It's been more than a month since the devastating earthquake and tsunami hit Japan, and some of you have asked for more about what's happening there. The news isn't particularly good. The news from the region continues to be be mostly bad.
Japan is still being hit by aftershocks, many of them significant (two 6+ magnitude quakes this past week), some of them now on the plate itself (often meaning inland, not offshore). This stopped both Nikon plants (as well as other camera company plants in the area) at least briefly, as additional damage was sustained and needed to be cleaned up. There's also evidence that stress has now built up on the neighboring plate, which could generate a quake close in to Tokyo itself. In short, this was a highly destructive event that has not yet wound down.
But the big news is power. I see several different estimates from various sources within Japan, but in no case does the Northern Japan power grid (which includes Tokyo itself) look like it will be anywhere near handling the demand this summer. There could be 50% shortfalls some days, and the average shortfall in July and August could reach 30%. That means frequent and long power blackouts, which is bad news for the camera industry. Sensor fabs, for instance, of which several are in the area, need continuous power (on top of the temperature issues in many critical processes, you've got to maintain continuous air filtration to avoid contamination). High quality glass factories can't be turned on and off easily with rolling blackouts. It appears that the deeper into the supply chain you go (e.g., back to chemicals and raw materials), the worse the problem gets: those plants can't be toggled on and off at whim. Many need long warm-up periods or continuous power to operate.
The auto companies are already talking about rotating their production (e.g., only one maker's plant open at any given time) to try to deal with the need to have continuous operation while painting/assembling yet still be down enough of the time to contribute to lower power demand. In other words, if it's Tuesday or Wednesday it must be Toyota, Thursday or Friday Honda, and so on. I'd say there's a strong chance that the camera industry might come up with something similar.
Between the March quake and early winter when things even up a bit in the power realm, I'm guessing that the output of the plants in the affected area could be less than 50% of normal. That could mean nearly nine months of significantly reduced production of everything from Nikon FX bodies, to Nikon/Canon/Panasonic lenses, to Sony CMOS sensors, to all those proprietary lithium batteries, and more. (In a few cases in the tech industry, for instance Sony HDCAM SR tape, production is completely stopped with no news of when it might resume, as the only plant in the world where it is produced is one in Sendai that was flooded by the tsunami.)
Frankly, the quake couldn't have come at a more critical time for the camera industry. Instead of moving forward into the next generation of cameras needed to hold off the cellphone camera craze, the camera companies are spending a lot of management and resource time just trying to stay operational at anything near "normal" levels. Critical paths no longer are held up by engineering missing a deadline, they're full of red flags as parts, resources, and plant time get scarce. 2011 is going to be a rough year for the camera companies, and their stocks already. On March 10th, for instance, Nikon holdings were trading at about 16 on the Berlin exchange, and immediately dropped to below 13 after the quake, which is about where they've remained. The same pattern is repeated for virtually all the Japanese electronics industry companies. In short, the world's financial markets are betting that all these companies will show significantly lower sales and earnings for the foreseeable future.
What's that mean for you? Well, at the consumer end (Coolpix, D3100, D5100, D7000, consumer DX lenses) I don't expect a lot of disruption. These products are made overseas (Thailand or China for the most part). While they still have some Japan-produced parts in them, so far we're not hearing of any critical shortages that should greatly impact those products. At the pro end, though, there's almost complete disruption occuring. The Sendai plant that makes the FX bodies has been closed several times since the earthquake, and many of the parts those cameras require are made in that plant, including chassis, lens mount, and more. Likewise, the pro lens plant has been slow to get back up to speed and disrupted by the frequent quakes and power outages. Nikon has not made a specific statement about availability of pro products, but I'm betting they'll be scarce for the next few months.
I'm going to again comment on one of Nikon's policies: the serialization of product by region and the way Nikon distributes and services globally is going to once again come into play in ways that are negative to the company's fortunes. Inventories of pro gear cannot be easily shifted from where they are to where they're needed due to Nikon's "global subsidiary" policies. Thus, when your local subsidiary runs out of something and can't get more from the factories in Japan, Nikon can't shift inventory easily from places that might have excess. Canon is looser in this regard, and I'll bet that's going to shift some pro sales to Canon during this period.
Nikon thinks their current global policies work to their advantage. They do not and never have. They arbitrarily limit sales in unusual ways that are not efficient. Markets aren't perfectly efficient, but Nikon's methods are less efficient, as anyone seeking an exotic Nikkor telephoto lens lately has discovered. It's time to change, Nikon.