Thailand floods causing top drive makers to curtail operations; prices on the rise

Flooding in Thailand is wreaking havoc on hard disk drive (HDD) manufacturers. Toshiba and Western Digital have announced a temporary shutdown of Thailand factories.  Toshiba has reported water is 2 meters deep in its storage device plant and 3 meters deep in its semiconductor factory in Thailand.

Two industry research firms, IHS iSuppli and IDC, have predicted that the overall market shortage due to factory flooding in Thailand will reach 25% to 28% over the next six months.  The largest producer of hard drives, Western Digital is expected to be hit the hardest as IDC predicts that up to 75% of its production will be temporarily shut down.  IHS iSuppli said fourth quarter hard drive shipments will decline by 27.7% to 125 million units, from 173 million shipped in the third quarter.  Users should expect to see price increases of some 10% over the third quarter.

Disk drive makers and their system customers are being hit due to shortages of mechanical and electrical components. The most critical loss for many manufacturers are a key component for read/write heads.  Ironically, one of the major components of read/write heads-- read/write head wafers -- are produced in Ireland, the U.S. and Japan. Another critical component, the slider, though, is produced in Thailand.  The slider is the block on the tip of a read/write head on which the record and playback head (wafer) is mounted. For Western Digital, that will be the component most critically short in 2012.

Current HDD inventories will be depleted this quarter, which will offset some HDD production shortfall.  HDD industry will find way to return to pre-flood production levels by March, but by that point HDD supplies will be at extremely low levels. BTG recommends that anyone looking at adding or upgrading their storage capacity in the next 3-12 months give serious thought to bring that purchasing decision forward before price rises appear inn the commercial market.