With
operations disrupted at more than a dozen hard disk drive (HDD) factories,
damage to the HDD industry is significant, due to widespread flooding across
Thailand. According to a report from IT analytics firm IDC, this will have a
direct impact on worldwide PC shipments through the first half of 2012.
The report said the severity of HDD shortages in the coming months largely
depends on the industry's ability to recover lost production capacity in
Thailand. While IDC said it believes HDD industry participants will recover and
restore HDD production capacity relatively quickly, HDD supply will remain
constrained for an extended period of time.
As
a result, PC vendors should plan for and expect “significant” HDD shortages by
mid-November that will continue into the first quarter of 2012. A large part of
PC production for Q4 2011 shipment has already taken place or can be completed
with existing HDD inventories, limiting the impact on fourth-quarter PC
shipments to less than 10 percent. But in a worst-case scenario, IDC projected
total PC shipments could be depressed by more than 20 percent in Q1 2012 versus
previous forecasts as a result of the HDD shortage.
Vendors
should also expect higher HDD prices as demand exceeds supply and manufacturers
face increased costs for components, expedited shipments and shifting of
production to new locations. The firm said the HDD industry will begin to
recover in the first quarter of 2012, and HDD pricing will stabilize by June,
with the industry running close to normal in the second half of 2012. There
will be opportunities for larger PC vendors to capture enterprise accounts from
smaller competitors and accelerate industry consolidation, particularly in
faster growth markets.
"In
response to the crisis, priority will be given to the large PC manufacturers
that drive HDD shipment volumes as well as to the high-margin products used in
enterprise servers and storage," said John Rydning, research vice
president of hard disk drives and semiconductors at IDC. "But the HDD
vendors can't neglect their smaller customers, whose business will continue to
be important once capacity is fully restored. Some interesting production and
partnering arrangements with customers can be expected as HDD vendors scramble
to bring production back up while simultaneously angling for a strategic
advantage."
In
the first half of 2011, Thailand accounted for 40 to 45 percent of worldwide
HDD production. As of early November, the flooding directly impacted nearly
half of this capacity. In addition to assembly and component facilities being
inundated with water, the industry faces work stoppages due to poor access and
power outages. The report cautioned that the full extent of the damage to HDD
industry factories will not be known until the floodwaters recede, although
it's already clear that there will be HDD supply shortages into the first
quarter of 2012.
"The
HDD shortage will affect smaller PC vendors and lower priced products most,
including mininotebooks (aka netbooks), emerging markets and entry-level
consumer PCs. However, even the largest vendors are expected to face HDD
shortages, particularly for portable PCs where the market is more
consolidated," added Loren Loverde, program vice president of IDC
worldwide consumer device trackers. "Nevertheless, the shortage will
relieve some pressure on pricing and margins, and present some opportunities
for strategic share gains among the larger players."
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