U.S. Companies Rush to Fill Japan's Supply Gap

After Japan's Renesas Electronics, the world's leading maker of chips used in car navigation systems, saw production capacity plummet due to Japan's Mar. 11 quake, Steve Sanghi, chief executive officer of Chandler (Ariz.)-based Microchip Technology (MCHP), sent a letter to customers. He promised to ramp up chip production to fill the gap. He also had a tip for companies trying to line up microcontrollers: Buy now or pay more later. He warned of looming backlogs and recommended that customers line up at least 12 weeks' worth of chips in advance—far more than required during normal industry conditions. Advised Sanghi: "Those who commit backlog [orders] to us secure the supply first."

With many Japanese companies operating at reduced capacity, U.S. companies are racing to meet higher demand for everything from fish meal used in shrimp farming to caustic soda that goes into making soap and paper. "It's a wake-up call for companies about the risk of a global supply chain: 'Hello, now we have a huge disruption that's going to be very costly,' " says Clyde V. Prestowitz Jr., president of the Economic Strategy Institute, which promotes U.S.-based manufacturing. "Business is going to be good for guys who have maintained a presence in the U.S."