Thailand Floods Could Impact HDD Supplies, Computer Production Worldwide

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The monsoon rains that have created flood conditions in Thailand since July are expected to have a significant impact on computer manufacturers and production worldwide, mostly affecting desktop and notebook PC systems. 

The downpours and flooding, the worst in 50 years, have forced the closure of hundreds of factories in and around the capital city of Bangkok. These businesses produce a third of the country’s total output of hard drives, or about 120m units per year, notes market research International Data Corp.  Thailand produces roughly a quarter of the world’s hard drives, according to market intelligence company iSuppli.

Satellite imagery of the floods in Thailand

As major manufacturers like Dell and HP rush to find alternate sources to avoid supply problems, other firms like Apple Computer, have said the factory closures and disruptions in hard disk drive supply will have a significant impact on desktop and notebook production and availability.  Earlier this week, Apple CEO Tim Cook, who replaced the late Steve Jobs, said he is “virtually certain there will be an overall industry shortage of disk drives,” notes an Associated Press report.

Disruptions and supply delays could very well continue into July of next year, said a Gartner analyst, although it is still too early to measure the full extent of the problem.

Leading HDD Makers Hard Hit
Hard disk drive manufacturers directly hit by the severe flooding include Western Digital, Toshiba, Seagate and Samsung. Western Digital, the world’s largest HDD maker, has approximately 37,000 workers in Thailand and was forced to temporarily halt production, according to an iSuppli report.  The company produced 53.8 million HDDs in the second quarter this year, representing a 32 percent share of the global market. Toshiba, the fourth ranked HDD supplier, also recently shut down production.

Seagate, the number two supplier of HDDs and disk drive components, was still operational as of this writing.  This situation may change, however, as component manufacturers like Nidec Corp., which produces the motor assemblies and supplies them to Western Digital, Toshiba and others, struggles to remain up and running as the rains continue to fall and floodwaters rise.

IDC analyst John Rydning points out that hard disk and other component suppliers have a history of swiftly recovering from disasters averting long-term difficulties.  A most recent example are the earthquakes that hit Japan earlier this year and brought a significant portion of the country to a standstill.  The hard drive industry’s supply chain is “highly redundant and remarkably resilient,” he was quoted as saying in an AP report.

However, multiple and global issues outside of natural disasters, such as the lingering recession and economic problems that have impacted Europe, Asia and the U.S. may make recovery a bit more difficult.   Other forces may also come into play, like continued price erosion in the industry, higher research and development costs, and increases in the cost of materials, adds iSuppli analyst Fang Zhang.



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