Thai floods, hard drive shortage threaten PC sales

SAN FRANCISCO Sat Oct 22, 2011 6:21am IST

People are evacuated on trucks from a flooded area in Bangkok's suburbs October 21, 2011. REUTERS/Kerek Wongsa

People are evacuated on trucks from a flooded area in Bangkok's suburbs October 21, 2011.

Credit: Reuters/Kerek Wongsa

Related Topics

Rajalakshmi (C), 28, smiles after winning the Miss Wheelchair India beauty pageant in Mumbai November 26, 2014. REUTERS/Danish Siddiqui

Miss Wheelchair India

Seven women from across India participated in the country's second wheelchair beauty pageant, which aims to open doors for the wheelchair-bound in modelling, film and television, according to organisers  Slideshow 

SAN FRANCISCO (Reuters) - A looming shortage of hard drives caused by floods in Thailand threatens to disrupt computer manufacturers as soon as December and hurt tech giants like Intel, Apple and Dell.

Thailand is the No. 2 maker of hard drives, used in laptops, servers and TV set-top boxes, and damage caused by flooding across the region could keep factories closed or hobbled for months, analysts and executives say.

World output of hard drives could fall as much as 30 percent in the final three months of 2011 and manufacturers that need them are now scrambling to snap up existing inventories, according to market research firm IHS iSuppli.

Leading chipmaker Intel said on Friday it was keeping an eye on a "dynamic" situation but expects existing stores of drives and unaffected sources to help keep the PC industry supplied. If manufacturers build fewer PCs, Intel sells fewer processors.

"The PC supply chain has proven to be very resilient, as most recently demonstrated in the response to the earthquake in Japan," Intel spokesman Jon Carvill said.

Top hard drive makers Western Digital and Seagate both have factories in Thailand, where flooding has killed at least 320 people since July and devastated industrialized areas in the center of the country.

Western Digital's factories are closed and Seagate, while its plants are running, warns it could face parts shortages.

Apple chief executive Steve Cook this week told analysts on a conference call he expects an industry shortage of disk drives.

PC PRODUCTION MAY BE IN JEOPARDY

Intel on Tuesday said the flooding would not affect the PC market in the fourth quarter.

Since then, details about the damage to Western Digital's factories in Thailand have caused some analysts to believe a shortage of hard drives could start interfering with PC production in December.

"There's a major disconnect here. We don't see how they can not be affected and we're recommending investors avoid Intel at these levels," said Brad Gastwirth, co-founder of ABR Investment Strategy, an independent research firm.

Western Digital said Thailand accounts for 60 percent of drive production. Its customers have about two weeks of inventory on hand and distributors have around four weeks of supplies.

As those inventories get used up, the supply of hard drives may be about 10 percent less than demand for the December quarter, estimated Rodman & Renshaw analyst Ashok Kumar.

With production in Thailand likely to be constrained for several weeks, customers will face larger shortages in early 2012, IHS iSuppli analyst Fang Zhang said.

No. 2 PC maker Dell said the flood would have little impact on its quarter ending this month but did not say how it expected to be impacted beyond then.

A Hewlett-Packard spokesman declined to comment.

(Reporting by Noel Randewich, additional reporting by Supantha Mukherjee in New York; Editing by Bob Burgdorfer)

FILED UNDER:

REUTERS SHOWCASE

WTO Trade Deal

WTO Trade Deal

WTO clinches first global trade deal in its history  Full Article 

Kashmir Attack

Kashmir Attack

Ten dead in Kashmir's worst militant attack in more than a year  Read 

OPEC Meeting

OPEC Meeting

Saudis block OPEC output cut, oil price sinks further.  Full Article 

E-Commerce Boom

E-Commerce Boom

Online grocers come up trumps in India's e-commerce boom   Full Article 

GDP, RBI Preview

GDP, RBI Preview

GDP growth set to weaken, business wants reforms more than rate cut  Full Article | Related Story 

Jaitley to Rajan

Jaitley to Rajan

Jaitley likely to meet Rajan on Monday to urge rate cut  Full Article 

Banking Sector

Banking Sector

India moves to allow more businesses to offer basic financial services.  Full Article 

Jamini Roy

Jamini Roy

Photo Gallery – Bengali household name Jamini Roy’s paintings  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage