Floods in Thailand

It turns out that the world is flat, or at least it is in many aspects other than physical. You may have heard that Thailand is flooding in a big way. People are displaced. People are dying. Perhaps you felt bad for those people but didn’t think the flood would effect you and your business. This is not an area that normally floods. Much like the middle of our own Country that experienced floods last year, these floods aren’t supposed to be happening. In addition to personal horrors businesses are suffering as well.

The two largest suppliers of hard drives, Western Digital and Seagate, have major operations in Thailand right in the flood zone. The news isn’t good for buyers.

Western Digital, which has been our preferred brand for years, is in particularly bad shape.

• Two factories which produce 60% of WD's drives are flooded and are not expected to be back online until Q3 of 2012.
• Q4 2011 shipments are expected to be less than half of Q3 2011 shipment numbers.
• Shipments to distributors have been stopped.  All product in the pipeline is being redirected to WD for allocation.
• Pricing on the existing inventory in the channel has jumped 45-60%.

Q3 2012 is a full year down the road. That’s how bad the flooding is.

Seagate isn’t in as bad as shape, but it is still a very bad situation with limited availability of hard drives.

• One HDD factory and most HDD component suppliers are in the flood area.
• Q4 shipments are expected to drop at least 10%.
• Scheduled shipments to distributors have been de-commited pending an allocation plan.
• Pricing on existing inventory in the channel has jumped 38 to 58%.

Seagate uses the term de-committed as opposed to stopped. To me, it’s the same thing. Distributors are unable to fill orders. Seagate has also not issued any estimate on when they expect to be back in full production.

These are not the only hard drive manufacturers to be suffering from the floods. Pretty much all hard drive components are manufactured in this area, so this effects everyone. These are small companies, more nimble perhaps in their own region but unable to shift production to other regions.

I’m expecting prices to continue to climb, especially after the end of this year. Next year hardware prices should be significantly higher than they are now. We will keep an eye on the situation for you and make recommendation accordingly.