Over recent weeks devastating floods have claimed hundreds of lives with many thousands of people displaced and left homeless. Alongside that massive human cost there has been a global impact. Thailand is a manufacturing hub for hard drives with both Seagate and Western Digital having major manufacturing facilities in the affected areas.
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Recent statements by Seagate say that "all Seagate factories in Thailand are operational and there are no logistical issues with employees reaching its factories. However, the hard disk drive component supply chain is being disrupted and it is expected that certain components in the supply chain will be constrained".
That's not surprising given that even if the factories aren't damaged, access to facilities and impact on on workers - none of whom have been killed according to Seagate - would cause disruption to factory operations.
It seems that the worst affected drive maker is Western Digital. A recent research note from Gartner analyst John Monroe suggests that 20 to 30 million HDDs will be taken out of the planned production of 180 million HDDs for the last quarter of 2011 and possibly the first part of 2012.
However, Christian Ober, senior analyst who follows the storage business closely for Ideas International paints a grimmer picture with as many as 70 million drives coming out of the market with consumer and non-computer drives the most affected. In his view, the recovery will take until the middle of next year with likelihood that the industry will move to an allocation model that will result in increased prices.
Ober's view is that "WD has a greater presence in the non-enterprise space and have stated their final assembly plants as well as supply chain have been directly impacted, Seagate who traditionally has been strong in the Enterprise space appear to be less affect in terms of final assembly, though they are exposed in terms of their supply chain".
That impact seems to be already affecting consumer and desktop systems with many vendors reporting price increases in consumer drives. A recent trek to a local consumer electronics research revealed new 1TB drives selling for more than older 2TB drives.
A recent Thai Flood Recovery update from Western Digital says that the company has suspended production in two factories that have been inundated. These factories account for 60% of WD's production with the remainder in Japan. The statement by President and Chief Executive Officer, John Coyne, is asking customers to "remain patient with us for the next few quarters" suggesting that recovery is going to take well into 2012.
Western Digital, as the most affected manufacturer in the market has seen disruption in production of most classes of to varying to degrees.
With enterprise storage, the storage is probably somewhat different. CTO Marketing at EMC Computer Systems, Clive Gold told us that "EMC’s supply of enterprise drives has not been affected and EMC does not expect any impact on our ‘business’ customers".
Hitachi's CTO for Australia & New Zealand at Hitachi Data Systems, Adrian De Luca, said that Hitachi "Has been impacted but not directly. What that means is that actual factories, supplies and where the end product is actually built has not been impacted. However we obviously do source components from other suppliers around the region and we need to ship these devices to get them out of the country. Given the closure of roads and ports we do expect some tightness to be around supply".
None of Hitachi's factories have been damaged at this time although the situation can change at short notice.
Some production lines have been impacted with customers advised via a letter earlier this month. "There are a number of SAS and SATA drives that are both enterprise and modular that are impacted" De Luca added.
Hitachi doesn't expect there to be any upwards price pressure with their enterprise customers as those prices are set in long term contracts. The impact will be on supply although De Luca told us that he expected to be able the storage volumes customers needed but perhaps not the density.
Need to know
- consumer drive supplies to be constrained with pricing to be driven upwards
- non-PC devices likely to increase in price as drive prices rises (eg PVRs and gaming devices
- enterprise storage likely to be supply constrained but pricing not likely to move significantly