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Thailand flooding smacks hard drive industry
Question of the Day
SAN FRANCISCO (AP) - The personal computer industry, already reeling from depressed demand, has been dealt another setback: Massive flooding in Thailand has curtailed production of a critical component _ computer storage drives.
Factories producing a third of the country’s hard drives have temporarily closed as flooding has gradually spread since August. Prices have spiked, and Apple warned that its Mac products will likely be affected.
Computer manufacturers, the companies that supply hard drives and the makers of components for those drives are all bracing for troubles. What’s not yet clear is what extent PC production lines will be affected and whether PC makers will absorb costs or pass them along to consumers.
Thailand makes about a quarter of the world’s hard drives and is the second-largest producer behind China, according to IHS iSuppli. Market research firm IDC estimates that the flooding has already affected a third of the country’s output, equating to more than 120 million hard drives a year. Avian Securities says the slowdown is already leading to price spikes that have added several dollars to the cost of some drives.
The flooding has killed 317 people, mostly from drowning. Nearly 9 million people have been displaced or otherwise affected. Estimates of the economic cost were $3 billion and rising.
The setback is particularly acute for the computer industry because it follows other troubles. Demand has slowed, particularly in the U.S. and Europe, because of debt and unemployment fears and the growing popularity of tablet computers, which causes many consumers to delay replacing PCs. In addition, the March 11 earthquake and tsunami in Japan hurt supplies of memory chips.
Western Digital has suspended its operations in Thailand. Floodwaters have affected two factories, which shut down last week. The company said its other hard drive manufacturing facilities, located in Malaysia, are fully operational. But it said flooding will have a significant impact on its ability to meet demand through the end of the year. Western Digital’s Thailand operations account for more than half of the company’s total hard drive output. Western Digital’s stock has fallen 15 percent since the company announced its delays last week.
Seagate says that its factories in Thailand are operational but warned that it is having difficulty getting some components. It said supply will be constrained the rest of the year, though the magnitude of the disruption is currently unclear.
Toshiba has also suspended its Thailand hard disk operations, as have a number of hard disk component suppliers.
Big computer makers are worried.
On Tuesday, Apple Inc. CEO Tim Cook said he is “virtually certain there will be an overall industry shortage of disk drives.” But because a thorough assessment of the damage hasn’t been possible, he said he couldn’t immediately give a timeline for recovery. Cook warned that Apple’s Mac lines would be most affected. Most of its mobile devices, including the iPhone and the iPad, use a different type of storage called flash memory.
Gartner Inc. analyst John Monroe called the disruptions “very serious and ongoing” and said they affect production of roughly half of the “spindle” motors that turn the hard disks, along with other technologies. Monroe expects slowdowns through March.
“We do not know yet what we do not know, many unknown unknowns,” Monroe said.
But as was the case with the crisis in Japan, the industry has some manufacturing safeguards for natural disasters. Production is generally spread among several countries. Some analysts were optimistic that the delays would be short-lived.
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