South Korean makers of semiconductors and liquid crystal display (LCD) panels said Monday that they expect the impact from Japan's devastating earthquake and tsunami on their business to be minimal.
Company officials and market analysts, however, did not rule out long-term impact from the natural disaster on the LCD and chip industries.
Japanese semiconductor and LCD makers are key rivals of South Korea's Samsung Electronics Co., LG Display Co. and Hynix Semiconductor Inc. At the same time, Korean companies rely on Japanese partners for the supply of components, equipment and raw materials.
Samsung Electronics is still examining the fallout from Japan's natural disaster.
"There seem to be some long-term effects, but it is hard to tell whether they will be positive or negative," said one company official. "Some bring up the possibility that we may get benefits, but we don't know the size of the damage (to Japanese companies)."
Japan is home to Samsung's key rivals in TVs, mobile phones, semiconductors and LCD panels. But Samsung's top LCD client, Sony Corp., and its mobile phone component suppliers are also in Japan.
LG Display said none of its Japanese partners, which supply equipment and raw materials to the world's No. 2 LCD maker, saw immediate damages from Friday's earthquake.
Hynix, the world's No. 2 memory chip maker after Samsung, also downplayed a short-term effect from the disaster. Hynix imports wafers and other raw materials for memory chips from Japan, but it has a "sufficient" level of stockpiles, a company official said.
Market observers, however, said that if normalization of the infrastructure, power supply and transportation in Japan takes longer than expected, it could potentially derail the tech sector's recovery.
"Japanese companies account for a huge portion of major components for LCD panels," Choi Ji-soo, an analyst at Kyobo Securities Co., said in a report after Friday's quake. "If the situation becomes a long-term issue, it could potentially pose risks in production and profitability of LCD panel makers."
Most local companies keep their inventory levels high enough to go through one month of production without further purchases, the analyst added.
Others added that prices of LCD and memory chips, which are sensitive to the supply and demand conditions, can be swayed by one of the worst earthquakes in Japan's history.
"Japan's place in the world's memory chip and LCD industries is very important," analysts at Eugene Investment & Securities Co. said in a report. "If Japanese IT companies experience production obstacles due to the supply of raw materials, severe power outages or transportation issues after the quake, it is likely to have a big impact on supply and demand conditions of the semiconductor and LCD industries."
Investors snapped up shares of Korean tech exporters on the first trading session since the 9.0-magnitude earthquake hit Japan on Friday, on expectations that prices of LCD panels and memory chips will rebound.
Samsung Electronics gained 4.41 percent to 900,000 won and LG Display rose 4.29 percent to 36,500 won. Hynix Semiconductor spiked 8.66 percent to 30,100 won.