Thai Floods Expected To Hit PC Shipments Into 2012

[webfact]

Thai floods expected to hit PC shipments into 2012

by Paul Handley

WASHINGTON, November 11, 2011 (AFP) - Thai flooding will significantly slow the global production of personal computers well into 2012, analysts said Thursday, as the country's huge hard disk drive industry struggles to its feet.

Supplies of hard disk drives (HDDs), the most critical component in personal computers, could tighten by 30 percent in the fourth quarter, forcing PC makers to tail back production, experts said.

According to industry specialist International Data Corporation (IDC), that could bring about, in the worst case scenario, a 20 percent cut in PC shipments in the first quarter next year.

Thailand's huge HDD industry, mostly located in industrial estates in the central plains, supplies about 40 percent of world market for the crucial memory components.

"The HDD shortage will affect smaller PC vendors and lower priced products most," like netbooks and the cheapest computers, said Loren Loverde of IDC.

"However, even the largest vendors are expected to face HDD shortages, particularly for portable PCs where the market is more consolidated," Loverde said.

Consultancy IHS iSuppli said the floods, which since July have inundated much of low-lying central Thailand, including the capital Bangkok, would cut global HDD shipments by some 51 million units in the current quarter, to 125 million units.

"Prices for HDDs have already begun to move higher on the anticipation of shortages, and it is likely that prices will remain elevated, possibly by more than 10 percent, for several quarters to come," IHS said.

Key producers like Toshiba and Western Digital have shut down large parts of their Thai production capacity due to the floods, which have also forced Thai-based producers of HDD components to halt production as well.

Jefferies & Co analyst Peter Misek said in a new research note that major PC makers like Dell and Hewlett-Packard have the disk drive stocks on hand to handle any shortages for the rest of this year.

The shortage "could counterintuitively help Dell's and HP's January quarter PC business as retailers and distributors clamor for as much supply as possible," Misek said.

"However, we believe a significant shortfall could occur in the April quarter once PC and HDD inventories are depleted and HDD production is still undersupplied."

As Thailand moves into the dry season and the floods recede, HDD producers should be able to get back to work by the end of the year, and IDC forecasts that the market will be back to normal with stable prices by June.

But the HDD shortage could also hit another part of the industry -- already-oversupplied dynamic random-access memory (DRAM) components.

"A fall in PC sales in the first half of 2012 will further depress the DRAM market. Manufacturers will continue to idle capacity while suffering weak pricing," said IHS iSuppli analysts.

IHS iSuppli said earlier that the floods had shut down assembly and test operations that many semiconductor makers run in Thailand as well, causing problems in that sector.

-- (c) Copyright AFP 2011-11-11

[LTGTR]

Certainly hasn't affected current prices.Both 2TB and 3TB external hard drives are under $100 and wil be lower on Black Friday IMO.

[Benjie]

Certainly hasn't affected current prices.Both 2TB and 3TB external hard drives are under $100 and wil be lower on Black Friday IMO.

2Tb drives have doubled in price in Thailand and in some of the local shops they wouldn't even sell you one unless you bought a motherboard, graphics card and memory as well. Nothing like a disaster for some price gouging.

[IsaanUSA]

Certainly hasn't affected current prices. Both 2TB and 3TB external hard drives are under $100 and will be lower on Black Friday IMO.

Here in the US the prices have generally increased 10%-25% over the past few weeks. Sure you can still find the occasional cheap drive, but in general the prices have risen considerably. Some online retailers (like Newegg) have even doubled prices on some drives. Current inventory already sitting on shelves in retail outlets seems to have not had a price increase.

Sounds like a great time for PC makers to push large SSD drives

[tlansford]

isuppli has been following this and you can sign up for news directly from them.

They also just had a webinar. It is online for on-demand viewing.

The outlook for the sector had been pretty good with IT spending coming back over the summer. Personally, I hope this will have a minimum impact and a short down-side cycle.

It is still remarkable to me how entire industries overlook weaknesses in their supply chains. Maybe weakness is the wrong word, ... vulnerabilities in the supply chains and their own core businesses.

[hughben]

Today at the main computer market (and cheapest) in Taipei, Taiwan prices of HDs manufactured in Thailand - WD, have increased almost 100%.

And a fair few vendors didn't even have any in stock.

[IsaanUSA]

I live in the middle of the USA where the only thing people know about Thailand is from the movie The Hangover. I went to a big electronics retailer over the past weekend to check. I would say 30%-50% of the drives are sold out. The more performance oriented drives are gone. The slower "Eco" models are still in limited stock. There is a sign posted saying "Due to the floods in Thailand (blah blah blah) limit one drive per person".

The retail prices at the store are still the same as before the flood, but online the prices are already higher.

Business themed news outlets are saying everything will be back to normal at the end of second quarter 2012. Crazy.

[FOODLOVER]

I am putting a gaming system together and have just been notified that the hard drive that i want has now more than doubled in price. This is in Pattaya at TOCOM.

[AleG]

I must congratulate Yingluck's government on this, not only their ineptitude is screwing Thais in Thailand, they are also screwing everyone the whole world over.

What's next? the pipe-dream economic policies bring in the second installment of the '97 crisis?

[tlansford]

I must congratulate Yingluck's government on this, not only their ineptitude is screwing Thais in Thailand, they are also screwing everyone the whole world over.

What's next? the pipe-dream economic policies bring in the second installment of the '97 crisis?

There enough ineptitude to go around. 25% of the world's HD supply is off line because all of these companies involved built their factories in a flood plane.

[IsaanUSA]

I must congratulate Yingluck's government on this, not only their ineptitude is screwing Thais in Thailand, they are also screwing everyone the whole world over.

What's next? the pipe-dream economic policies bring in the second installment of the '97 crisis?

There enough ineptitude to go around. 25% of the world's HD supply is off line because all of these companies involved built their factories in a flood plane.

I would assume that the companies did their research before investing millions of dollars and the risk/reward was enough that they still decided to build. The companies took a gamble and they lost. Although I wonder if they same manufacturers did some research on where the factories were located (in relation to the flood plane) for their suppliers.

[tlansford]

I must congratulate Yingluck's government on this, not only their ineptitude is screwing Thais in Thailand, they are also screwing everyone the whole world over.

What's next? the pipe-dream economic policies bring in the second installment of the '97 crisis?

There enough ineptitude to go around. 25% of the world's HD supply is off line because all of these companies involved built their factories in a flood plane.

I would assume that the companies did their research before investing millions of dollars and the risk/reward was enough that they still decided to build. The companies took a gamble and they lost. Although I wonder if they same manufacturers did some research on where the factories were located (in relation to the flood plane) for their suppliers.

I agree with your assumptions. In all likelihood, we will never know. But the if a company builds a factory, both expensive and critical to their business, and then places it in a flood plane, ...

Many if not most of these companies are not Thai. As it looks like you are from the US, then you probably know, in the USA, even if it is just the purchase of a house, you are well aware of the fact that the house is in a flood plane or not. One has to wonder about the decision-making process of the companies which chose to locate in these areas. Even if there were (I presume) specific incentives and assurances.

Normally, multinational corporations have standard processes for site evaluations which should layout liabilities and risks. Looks like many companies ignored the facts when making their decisions.

[FOODLOVER]

I must congratulate Yingluck's government on this, not only their ineptitude is screwing Thais in Thailand, they are also screwing everyone the whole world over.

What's next? the pipe-dream economic policies bring in the second installment of the '97 crisis?

There enough ineptitude to go around. 25% of the world's HD supply is off line because all of these companies involved built their factories in a flood plane.

I would assume that the companies did their research before investing millions of dollars and the risk/reward was enough that they still decided to build. The companies took a gamble and they lost. Although I wonder if they same manufacturers did some research on where the factories were located (in relation to the flood plane) for their suppliers.

I agree with your assumptions. In all likelihood, we will never know. But the if a company builds a factory, both expensive and critical to their business, and then places it in a flood plane, ...

Many if not most of these companies are not Thai. As it looks like you are from the US, then you probably know, in the USA, even if it is just the purchase of a house, you are well aware of the fact that the house is in a flood plane or not. One has to wonder about the decision-making process of the companies which chose to locate in these areas. Even if there were (I presume) specific incentives and assurances.

Normally, multinational corporations have standard processes for site evaluations which should layout liabilities and risks. Looks like many companies ignored the facts when making their decisions.

As a current Real Estate license holder in the state of Hawaii( Pretty much the same laws as California) i would have to agree about the disclosure. Seems strange to knowingly put a factory of this importance in harms way. No EPA impact study( Thai style)? How did they get insured? Geological surveys? On Maui you even need to disclose if your on the dry side or rainy side of the island because of mold issues. Seems the Japanese were a bit gung ho(movie reference) on the old profit margins. I wonder who assessed the risks and who was in charge of making sure that the due diligence required was done to international standards. Should have a piece of paper with some ones signature on it stating that all things are kosher, no?

[IsaanUSA]

Yes Mr Lansford, we will probably never know. And like FOODLOVER says, the motivation was probably profit (or more likely economic incentives to build).