There has been another development in our ongoing coverage regarding how the flooding in Thailand has been affecting the hard drive industry. With the waters receding and the supply chains starting to open back up, the prices on drives have started to level off. We were expecting them to return to pre-flood pricing somewhere around the middle of 2012.
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We’ve finally got some positive news amongst the dire supply conditions brought on by the Thailand floods; Western Digital has resumed its hard drive production in Thailand.
According to a press release on the WD Web site, the company restarted production of hard drives in one of its buildings on November 30, one week ahead of schedule.
They have also removed all the the slider head equipment (a key component in drive manufacturing) for refurbishment. Head slider manufacturing is expected to restart some time in March. Other facilities are expected to be pumped dry within the next ten days or so, allowing refurbishment to commence there, as well.
While it’s a glimmer of hope, it should be noted that those slider heads are a significant component of hard drives, and that supplies are still low. WD estimates this quarter’s hard drive production will be around 120 million units (including inventoried supply at the beginning of the quarter) versus a demand of between 170 million and 180 million units.
So, hard drive supplies are still going to be short for a while, but at least there’s a light at the end of the tunnel.
We know that, to some, we seem to be talking about the Thailand situation an awful lot. However, since the flooding has affected hard drive production, that impacts the entire industry and we figure it’s better to let you know what’s happening, so you can make the best purchase decisions for your storage needs.
As we’ve mentioned before, not only are plants for major drive brands like Western Digital affected by the flooding, so are manufacturers of the individual hard drive components. As you might not know, most hard drives have upwards of 200 individual components that go into them (many of them produced by individual suppliers in the flooded region), even if the drive manufacturer’s plants weren’t directly affected by the floods, they are still facing shortages of components. Hard drive motor manufacturer Nidec, who we’ve mentioned before, is just one example.
Even once the waters recede, drive industry experts are saying it could take a year for these component manufacturers to replace their machinery, and many may have to relocate as well. Some companies, like Nidec, aren’t waiting for the waters to recede and have sent divers in to unbolt and retrieve equipment. Others, like suspension arm maker Hutchinson Technology, still has $50 million worth of specialty manufacturing equipment bolted to their now-submerged factory floor.
While many analysts have stated that production should be back to normal by the end of Summer 2012, others are now projecting shortages until the end of 2012 at the very least, primarily because many of the components are surprisingly single source supplied.
In other words, it doesn’t matter if you can push a car down the assembly line if an essential component, say the steering wheel, isn’t available.
Three weeks ago, I thought the Thailand/hard drive situation was bad and had worst-case scenarios in consideration. A week later and the worst of the worst-case didn’t line up with what was becoming reality. It seems like there may be some improvement in drive supply by mid-December, but it’s still disastrous and supplies are not likely to return to previous “normal” levels for many months—possibly even as long as a year.
For those who haven’t been following our coverage of the problem, here it is in a nut shell.
First, Western Digital’s main production complex in Thailand (one that produces about 60% of WD’s output and roughly 18% of the overall world drive supply) was first inaccessible, then literally under water from the flooding. Adding to the problem, there are also many drive sub-component manufacturers also impacted by the flooding; the one most critical to the hard drive industry would be be Nidec. Article Continues…