Japan earthquake disrupts auto and chip supply chains in Kyushu

Japan's auto and chip manufacturers halted production on Wednesday at plants on the island of Kyushu struck by a deadly earthquake that disrupted operations in a region key to the supply chains of both industries.

Toyota 7203.T said it would halt operations at three plants in the region through Friday as it weighed the quake's impact on suppliers and logistics, just hours after resuming production it had stopped the previous day.

Tuesday's 7.1-magnitude quake in the Kumamoto region damaged roads and knocked out power to thousands of homes, raising concerns about supply chains and logistics and affecting other manufacturers besides Toyota.

"The situation, including aftershocks and recovery efforts, is changing daily," the world's biggest automaker said in a statement about the suspensions at its Miyata, Kanda and Kokura plants from Wednesday until July 31.

Kyushu is a key base for Japan's automotive and semiconductor industries, which account for roughly two-fifths of regional industrial output, the industry ministry says.

However, analysts said factory shutdowns at automakers and chip manufacturers appeared to be driven largely by precautions for workers, rather than by damage to production facilities.

"The negative impact on production activity and supply chains will likely be relatively temporary," said Takahide Kiuchi, executive economist at Nomura Research Institute.

By contrast, the 2011 Tohoku earthquake temporarily crippled part of Japan's auto supply chain, disrupting the industry globally.

Toyota makes a wide range of Lexus luxury models at its Miyata plant, which has annual production capacity of about 430,000 vehicles, and hybrid car units and engines at the other two.

Honda Motor 7267.T said it would extend an operation suspension at its Kumamoto motorcycle plant, also until Friday, to allow repairs to quake-damaged parts of the factory.

QUAKE HITS CHIPMAKERS IN KUMAMOTO

Kumamoto has attracted chip investment from leading players such as Taiwan Semiconductor Manufacturing Co (TSMC) 2330.TW in recent years.

The world's largest contract chipmaker evacuated staff at the Kumamoto fab of its Japanese unit, Japan Advanced Semiconductor Manufacturing (JASM), following the quake.

All personnel were safe, it said on Tuesday, while it is inspecting facilities and assessing the quake impact.

Chipmaker Renesas 6723.T said it halted operations at two Kumamoto plants, which had suffered fallen ceiling panels, cracks in walls and some water leaks.

Nissan 7201.T said it had no plans for a suspension at its plant in Fukuoka, north of Kumamoto, where it makes the Rogue SUV, known locally as the X-Trail, but added that it was monitoring its supplier and logistics situation.

On Tuesday, Sony 6758.T said it had evacuated employees and halted operations at its semiconductor-making facilities in Kumamoto. Tokyo Electron 8035.T said it had not confirmed any major damage at two plants there.

Kiuchi said the earthquake's economic impact was likely to be smaller than that of recent major Japanese quakes since it caused relatively slight damage to homes and infrastructure.

Losses were likely to keep below 1 trillion yen ($6.11 billion), he estimated.

($1=163.5800 yen)

-Reporting by Daniel Leussink, Anton Bridge and Sam Nussey; Editing by Stephen Coates and Clarence Fernandez/Reuters