One-third or more of the expected hard drive demand in the fourth quarter is in jeopardy of going unfulfilled due to the Thailand floods which have put much of that country, including a large part of its hard drive industry, under water.
That sober assessment comes from a Thursday SEC filing from Seagate Technology.
The assessment follows by a week Western Digital's SEC filing in which it states that about 60 percent of its hard drive production is shut down because of the floods.
In its filing, Seagate wrote that the component supply chain for the hard drive industry was disrupted by the severe floods in Thailand, and that the impact on the hard drive industry is " expected to be substantial and to extend over several quarters."
Hard drive demand for the fourth quarter of 2011 had been predicted to be about 180 million drives, but industry projections now show supply to be limited to between 110 million and 120 million drives, and that demand will "significantly" exceed supply through at least the March 2012 quarter, Seagate wrote.
Seagate's hard drive and component assembly factories in Thailand were spared from the flood, but manufacturing at those facilities has been curtailed due to "external component constraints," Seagate wrote, referring to components from third-party suppliers in Thailand were impacted by the flood.
Seagate now expects to report a total production of 41 million to 45 million hard drives for its December 2011 quarter, compared to the 48.9 million drives it shipped in the fourth calendar quarter of 2010, according to the filing.
Steve Luczo, chairman and CEO of Seagate, said Thursday at the Needham & Company HDD and Memory Conference that Seagate had been expecting a relatively flat total hard drive market of about 180 million to 200 million units per quarter through 2012, but that will no longer be possible, according to a transcript of his conversation provided by Seagate.
"When you look at the structural issues in the industry, it's hard to see a path beyond [a] kind of incremental growth over the course of the year that goes something like 120, 130, 150, 170 (million units in the four quarters)," Luczo said. "And it says even by the end of the calendar year, you've got pretty significant shortfalls in the 50 (million) to 70 million (units per quarter) range still."
Western Digital, in its October 28 SEC filing, painted a more dismal picture of the flood's impact.
All Western Digital's hard drive and component manufacturing facilities in Thailand have been shut down since the week of October 10 due to the flooding. The company also wrote that about 60 percent of its entire hard drive production is done in Thailand.
Western Digital "expects the suspension of its operations in Thailand and that of some of its suppliers will continue into the March quarter and possibly beyond," and that it is exploring alternatives "to maximize existing capacity in other locations, including its Malaysian hard drive assembly facility and a third-party slider fabrication facility in the Philippines," it wrote in the filing.
As a result, Western Digital wrote, it "expects that its hard drive shipments during the December quarter will be between 22 million and 26 million units in contrast to the 58 million units shipped in the September quarter and that the overall hard drive industry unit shipments in the December quarter will also be supply constrained due to the flooding."
Next: The Coming Ripple Effect
The expected shortage of hard drives was a big topic of conversation among VARs at D&H Distributing's fall conference in Hershey, Pa., said Dan Schwab, co-president of the Harrisburg, Pa.-based distributor.
"It's going to have a ripple effect from mass appliances to consumer electronics to notebooks. A lot of vendors have already modified prices, changed delivery expectations or expressed concern," Schwab said.
Some vendors said constraints could reach 90 to 180 days for availability for some niche drive products.
"Products will be flowing but there will be some constraints. Some vendors are slightly better off than others based on size and their pipeline but anything that takes a hard drive will be effected," Schwab said.
D&H expects to see demand in competing drive technology, such as SSD, pick up as vendors and customers look to avoid constraints in hard drives.
"That will drive new opportunities. It'll be a dynamic market for the next few months," he said.
Spokespeople from Seagate and Western Digital were unable to provide updates beyond their companies' most recent SEC filings.
Scott Campbell contributed to this article.