|HDD Supply Shortage due to Floods in Thailand|
As the huge earthquakes and tsunami hitting Sendai which is north of Tokyo in March 2011 did not cause any hardship to the supply chains in the PC industry, we were not alerted to any potential damage to the PC industry by the floods in Thailand that first occurred in mid October 2011. When we obtained the first warning, it was too late as HDD supply was already in shortage and prices had sky-rocketed. We took immediate actions to stock up on HDDs and have been lucky to get support from our suppliers. As this newsletter was drafted, we have stocked up enough 500GB SATA HDD for November and December system building. As the demands for bigger HDD, SAS or notebook size are not well defined, we were not able to stock up any and we will have to pay the prevalent market price for them whatever the price is.
The next paragraph is an extract of a letter sent to us in late October 2011 from Western Digital to explain their position. The last paragraph is an extract of a Reuter report dated 31 October 2011 on promises from the Thai Prime Minister that factories shut down due to the floods could be restored in 3 months. We will continue to monitor the developments in the supply chains and take the earliest possible actions to protect the interest of the Compucon channel.
(Western Digital Letter Extract) The torrential flooding in Thailand has claimed hundreds of lives, displaced hundreds of thousands of residents and directly and profoundly impacted thousands of businesses. Western Digital's business is one of those. We understand that this tragedy also is indirectly affecting your business and we ask for your patience while we recover our facilities and work to rebuild our production. In mid-October we temporarily suspended production at our two factories in Thailand, which have been inundated by floodwater, to protect our employees and our equipment and facilities. We manufacture approximately 60 percent of our hard drives in Thailand. With the greatest direct manufacturing exposure to the flooded areas, the impact on our business in the short term will be greater than to other HDD manufacturers. In addition, many of our component suppliers have been impacted, leaving material for hard drive production considerably constrained. We are working with suppliers to assess the extent of their impact and help devise short- and long-term solutions. This is a complex and dynamic problem that will require extensive rebuilding for the Thai people and government, and bring unprecedented challenges to the HDD industry for multiple quarters. However, limited component availability throughout the supply chain and extraordinary acts by manufacturers to bring systems back online as quickly as possible will ultimately raise the costs of some of our products.
(Reuter Report Extract) - Thailand hopes industrial estates swamped in its worst floods in half a century can be up and running within three months, the prime minister said on Monday, as the danger of central Bangkok being inundated appeared finally to have passed. Nearly 400 people have been killed in months of floods that have disrupted the lives of more than 2 million, economic growth has been set back, and global supply chains for Thai-made computer and auto parts thrown into disarray. The disaster has been the first big test for the government of Prime Minister Yingluck Shinawatra, a political novice who took over this year after an election that many Thais hoped would heal deep divisions. Yingluck said it should take three months to rehabilitate the estates, where some foreign investors have built production hubs. "We expect after the water recedes the industrial estates will recover within three months if we can release the water and recover the machinery quickly," Yingluck told reporters. A resident of Pathum Thani province said the water had fallen for the first time and was down about 5 cm (2 inches) on Monday, but was still nearly 1.5 metres (5 feet) deep.