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HDD undersupply slumps Intel revenue forecast

Posted: 14 Dec 2011 ?? ?Print Version ?Bookmark and Share

Keywords:HDD? supply shortage? PC supply? SSD?

As a result of the Thailand flood that did a number on the HDD supply, Intel Corp. has reduced its revenue forecast for Q4. From the initial $14.7 billion, plus or minus $500 million, estimate, Q4 revenues are now seen to settle to $13.7 billion, plus or minus $300 million, stated the company.

Sales of PCs are projected to increase in 4Q11. However, the global PC supply chain is cutting inventories and MPU purchases due to HDD supply shortages, which Intel expects to linger until 1Q12. The company anticipates a rebuilding of MPU inventories as supplies of HDD recover during Q1 next year.

Intel's statement regarding its revenue forecast has sent its shares falling nearly five percent. The flood in Thailand has caused billions of dollars in damages since late July and upset international supply chains in the PC and automobile industries. PC makers have been struggling to buy increasingly scarce hard drives after the flooding shut down factories in the country, considered as the world's No. 2 exporter of the components.

Intel's SVP, Tom Kilroy, has disclosed that in the past two weeks, they have noticed a significant change in order rate. "Most of our customers are concerned the shortage will continueespecially through the early part of the first quarter."

Since October, other PC makers including HP, Dell, Lenovo and Acer have warned that they may build fewer PCs as they use up the current stock of hard drives and struggle to replace them. Intel said its customers are reducing their stock of chips in anticipation of the hard drive shortage continuing early next year, although it said it still expects sales of PCs to be up in Q4.

Western Digital, the hard drive manufacturer hit hardest by the floods, resumed production this month and warned of tight global supplies into next year. It expects a global shortage of 60 million hard drives in the December quarter.

Seagate Technology's Thai plants have been largely unaffected by the catastrophe, but production has been curtailed due to tight component supplies as factories of some key suppliers were flooded.

Intel's CFO has forecasted that the shortage will accelerate adoption of solid-state drives (SSDs) as the main storage devices in PCs. Made with NAND semiconductors, SSDs are much faster than hard drives but are also a lot more expensive and are currently used only in devices such as MacBook Air, noted the company.

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