Massive Thailand Floods Likely To Cause Widespread Hard Drive Shortage

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The massive flood that hit Thailand last week is wreaking havoc on the hard drive industry and causing system builders to scramble for supplies.

The monsoon-related flood waters, which Reuters said have covered about one-third of Thailand's surface, are severely impacting the country's manufacturing business, including the vital hard drive business, where it accounts for about a quarter of the world's production.

The Thailand floods once again highlight the dangers of concentrating manufacturing of critical components in relatively small areas.

A massive earthquake and subsequent tsunami in Japan earlier this year had a major impact on the world's electronics manufacturing and caused a rise in the cost of many components used in the IT industry.

A massive 1999 earthquake in Taiwan caused DRAM prices to spike by six to eight times due to damage caused by production facilities and to the power they require.

Analyst firm IHS iSuppli said that the worst floods Thailand has seen in over 50 years is resulting what may be a shortage of hard disk drive supplies this quarter and the first quarter of 2012.

As a result, hard drive supplies will probably be constrained throughout the fourth quarter, wrote Fang Zhang, a storage analyst at IHS iSuppli, in a research report on Monday.

IHS iSuppli had been expecting vendors to produce 176.2 million hard drives in the fourth quarter, but said it will likely downgrade its forecast as a result of the floods. About 25 percent of the world's hard drive production facilities are located in Thailand.

About 60 percent of Western Digital's hard drives are produced in Thailand, while 50 percent of Toshiba's hard drive production is in that country, IHS iSuppli wrote.

However, the biggest impact from the floods could be on a single company, Nidec, which produces about 70 percent of the world's hard drive motors in Thailand, including motors used by Western Digital, Seagate, Hitachi GST, Toshiba, and Samsung.

Another company, Hutchinson Technology, which makes hard disk drive suspension assemblies, also suspended production in Thailand, but plans to increase production in the U.S., IHS iSuppli said.

Western Digital, the world's largest hard drive manufacturer, on Monday said in a statement that it extended the suspension of its Thailand operations thanks to rising water which this weekend and into early Monday inundated multiple hard drive manufacturing facilities. However, the company said, all its employees are safe.

While Western Digital also has manufacturing facilities in Malaysia, Singaproe, and the U.S., the Thailand floods are expected to have a major impact on its operations.

In its statement, Western Digital said, "The company now expects that the flooding of its Thailand facilities, combined with flood damage to the company's supply chain in Thailand, will have significant impact on the company's overall operations and its ability to meet customer demand for its products in the December quarter."

Seagate, the second largest hard drive manufacturer, last week said that its hard drive factories are all in operation, and that its personnel are all safe. However, Seagate said in a statement, the component supply chain for its drives is being disrupted.

In its statement, Seagate said, "Given the volatility of the situation it is unclear what the magnitude of the supply chain disruption will be to Seagate’s hard disk drive output from its Thailand operations. Seagate is actively managing its supply chain and factory output to align production capabilities and optimize its build schedule to meet customer requirements. As a result of the disruption caused by the floods, Seagate anticipates hard drive supply will be constrained throughout the current quarter."

Next: Scrambling For Supplies

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