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Semiconductor industry

Looming Hard Drive Shortage Threatens Computer Manufacturers and Tech Giants

Strategic Insights

— 1 min read

Flooding in Thailand, a major manufacturer of hard drives, is set to disrupt computer manufacturers in December, potentially affecting tech giants like Intel, Apple, and Dell. Thailand is the second-largest producer of hard drives used in laptops, servers, and TV set-top boxes. Analysts and executives warn that factories may remain closed or partially operational for months, leading to a potential 30% drop in world hard drive output by the end of 2011. This has prompted manufacturers to scramble for existing inventories, with top hard drive makers Western Digital and Seagate facing parts shortages and factory closures.

Key Takeaways:

  • The flooding in Thailand threatens to disrupt computer manufacturers as early as December, with potential impacts on companies like Intel, Apple, and Dell.
  • Thailand is the second-largest producer of hard drives, with Western Digital and Seagate having factories in the country that are either closed or facing parts shortages.
  • The damage to Western Digital's factories in Thailand could cause a shortage of hard drives, with production likely to be constrained for several weeks.
  • Analysts estimate that the supply of hard drives may be 10% less than demand in the December quarter, with customers facing larger shortages in early 2012.
  • The potential 30% drop in world hard drive output by the end of 2011 could have significant impacts on the computer industry and manufacturers that rely on hard drives.
  • Intel expects its existing stores of drives and unaffected sources to help keep the PC industry supplied, but analysts are cautious, warning of a "major disconnect" and recommending investors avoid Intel at current levels.
  • Western Digital's customers have about two weeks of inventory on hand, while distributors have around four weeks of supplies.

Statistics:

  • 30% potential drop in world hard drive output by the end of 2011 (IHS iSuppli)
  • 60% of Western Digital's drive production accounted for by Thailand
  • 10% less supply of hard drives than demand in the December quarter (Rodman & Renshaw analyst Ashok Kumar)
  • 2 weeks of inventory on hand for Western Digital's customers
  • 4 weeks of supplies for Western Digital's distributors
  • 320 people killed in the flooding in Thailand since July

Sources:

  • IHS iSuppli
  • Intel
  • Western Digital
  • Seagate
  • ABR Investment Strategy
  • Rodman & Renshaw
  • Fang Zhang, IHS iSuppli analyst
  • Jon Carvill, Intel spokesman
  • Brad Gastwirth, ABR Investment Strategy co-founder
  • Ashok Kumar, Rodman & Renshaw analyst

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