The monsoon rains and floods of Thailand has affected close to 1000 factories across central Thailand and is having a major impact on the hard drive industry. I spoke with my contacts in Taipei last night that told me that the fall out from this, both in human terms as well as business terms would be huge.
At the human level, over 50 thousand jobs are affected in the short-term. But a more urgent problem has arisen. There is now an outbreak of malaria that has struck the area and is causing serious health concerns. And that has now become the government’s priority. Western Digital and Toshiba are the hardest hit and Seagate and Hitachi have been shut down by supply constraints. Seagate could use this to gain ground on Western as their facility was on high ground and will not have to make any capital equipment investments like the others whose equipment were wiped out by the flooding. But they are still impacted by supply constraints.
At the business level, Thailand supplies over 60% of worldwide hard disk drives and 50% of assembly capacity. Even drives assembled somewhere else depend on Thai produced parts.
My sources in Taipei say that this will have a dramatic impact on most PC vendors ability to deliver the amount of PCs they have forecasted in Q1. They believe the shortages of disk drives will mean that it will decrease by at least 30% the amount of PCs that could be shipped in Q1. And because the situation in Thailand is so fluid, they can’t predict how much better things could be in Q2 of 2012 either.
And while PCs are being impacted by this shortage of HDD, so are things like Digital A/V equipment, Digital Imaging systems, and DVR’s as well as in-car navigation systems that are all moving to hard drives to handle their maps and new Internet apps.
What this means for consumers is that if you are looking at buying a PC, do it now. We could see price increases start hitting as early as Dec. All of the PCs and laptops on the shelves now have been priced at the current rate for HDD, while PCs that will ship starting in Dec could see price increases already hitting them by mid month.
And if my sources in Taipei are correct, the component price for HDD’s factored into laptops and desktops could be as much as 20% more by Q1 and some have told me it could be as much as 30-50% given the extreme shortages.
If there were a silver lining to this problem it would be that it could push more of the OEM’s to adopt SSDs for some laptops and all Ultrabooks, and with greater demand for SSDs, SSD prices could start coming down.