Johannesburg, 13 Dec 2011
Global PC chipmaker Intel will see about $1 billion to R8 billion in revenue wiped off its top line in the fourth quarter of its financial year, due to a global hard drive shortage caused by recent devastating floods in Thailand.
The flooding during the recent monsoon season, the worst in about 50 years, resulted in hundreds of people being killed as more than two-thirds of the country was swamped, according to Google.
Thailand accounts for about half of the world's hard drive production, but several factories had to close up shop for weeks as facilities were under water.
As a result, production of drives and other key PC components has come under pressure, leading to a global shortage and prices more than doubling in the local market.
In the first half of the year, Thailand accounted for between 40% and 45% of worldwide production, and by early November, nearly half of this production was affected by floods, says IDC.
The research company says production has been disrupted at more than 12 hard disk drive factories.
Spill-over effect
The flooding has hit PC manufacturers, as well as component makers such as Intel. The company, one of the world's biggest chipmakers, says its fourth quarter results will be lower than expected, because of hard disk drive supply shortages.
Intel says its revenue will drop by about $1 billion as a result of the hard drive shortage. It says turnover will be about $13.7 billion (R112 billion), plus or minus $300 million (R2.5 billion). In October, Intel reported third-quarter revenue of $14.3 billion (R116 billion).
“The worldwide PC supply chain is reducing inventories and microprocessor purchases as a result of hard disk drive supply shortages,” says Intel. The chipmaker expects hard drive shortages to continue into the first quarter.
Reuters quotes Intel senior VP Tom Kilroy as saying: “In the last two weeks, as the supply became more apparent, we saw a substantial change in our order rate. Most of our customers are concerned the shortage will continue - especially through the early part of the first quarter.”
Intel is not alone in being affected by the shortages, a situation that is only expected to normalise towards the end of the first half of next year.
Acer recently said the shortage situation is “severe” and “the exact timetable for a full recovery is unknown at the current time”. The PC maker added that the impact will only be near-term, and would trim PC shipments by between 5% and 10% quarter-on-quarter.
Under water
Western digital, one of the world's largest hard drive manufacturers, said earlier this month that it restarted production of hard drives at one of its factories at the end of November, a week ahead of schedule. The factory, in Bang Pa-in, had been submerged in about six feet of water since 15 October.
Western Digital's other Thailand hard drive facilities at Navanakorn were under about two feet of water, and would be pumped dry by about 10 December.
President and CEO John Coyne said “much work remains to be done, but we couldn't be more pleased with the effort and results thus far, including tremendous support from our supply partners and strategic customers”.
Western Digital expects hard drive industry shipments in the December quarter to be limited to about 120 million units, because of production and supply constraints related to the historic flooding in Thailand.
The hard drive maker says, however, that demand will outstrip supply by about 50 million units, and supply constraints will continue in the March quarter and beyond.
Towards the end of last month, Seagate said hard disk drive supply will be significantly constrained for several quarters. It expects the sector to ship between 110 million and 120 million units in the December quarter.
Although the company's Thailand plants have mostly been unaffected by the floods, production has been impacted because of shortages in components from its suppliers that were hit by the disaster.
Seagate believes the industry's ability to manufacture and ship hard disks drives will gradually improve next year.
Hannes Fourie, IDC senior analyst for systems and infrastructure solutions, says although it's a temporary situation that will ease up towards the end of the first half of next year, the global shortage will hurt all the major PC companies.
Fourie has marginally trimmed his sales forecast for the South African market, as a result of the global shortage. He says the situation will recover towards the end of the first half of next year.
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