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Thai floods cause chain reaction in market supply

Posted: 26 Oct 2011 ?? ?Print Version ?Bookmark and Share

Keywords:Thailand foods? HDD supply? PC market?

Thailand's massive floods have already claimed the lives of more than 350 people and several manufacturing facilities in the different parts of the country have already ceased their operations. Now rapidly rising flood waters are now threatening Bankok, Thailand's capital.

In a televised address late Sunday night, Governor Sukhumbhand Paribatra said that water was surging from north of the country toward the Thai capital. The water could potentially flood north and north-eastern city districts and even the government's anti-flood headquarters at Bangkok's old international airport.

On Monday, Sukhumbhand warned that the flood waters could reach further south to the more developed parts of the city.

Prime Minister Yingluck Shinawatra has already announced that the flood waters could last for more than a month.

Disrupting the HDD market
The floods are already seen to cause supply shortages for the HDD market as the country is the No. 2 maker of HDD used in laptops, TV set-top boxes and servers. Major HDD players Western Digital Corp. and Toshiba Corp. have temporarily stopped production of HDDs in Thailand, impacting a huge part of global hard drive manufacturing. Hutchinson Technology, a hard disk drive and assembly maker, also temporarily suspended its operations due to flooding and power outages.

Western Digital said that 60 percent of its drive production comes from Thailand. Its customers have about two weeks of inventory on hand, while distributors have around four weeks of supplies left.

Although all its factories in Thailand are currently operational, Seagate Technology LLC expects that certain components in the supply chain will be constrained. Given the unstable conditions, Seagate says it is unclear what the magnitude of the supply chain disruption will be to its HDD output from its Thailand operations.

World output of HDDs could fall as much as 30 percent in the final three months of 2011, according to market researcher IHS iSuppli. Manufacturers that need these hard drives are scrambling to get a hold of the existing inventories, added the research firm.

Unstable HDD affects PC market
The imminent HDD shortage will also disrupt computer manufacturers. Analysts believe that PC makers will feel the effect of the supply shortages as soon as December and could greatly impact big companies such as Apple, Intel and Dell.

Satish Lele, VP of consulting for Asia Pacific at Frost and Sullivan in Singapore, believes that Asia PC makers will also be affected. "From the Asia context, of the impact will be on the Taiwan PC manufacturers, companies like Acer and Asustek Computer," he said.

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