IDC Lowers shipment forecast for HDD and PCs

With flooding in Thailand continuing to wreak havoc on the hard drive industry, shortages will soon create a trickle-down effect, disturbing DRAM, PC supply chains and the system builder channel in the region.

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IDC Lowers shipment forecast for HDD and PCs Shortages are expected to continue until end of Q1 in 2012, says Tantawi.
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By  Manda Banda Published  February 5, 2012

With flooding in Thailand continuing to wreak havoc on the hard drive industry, shortages will soon create a trickle-down effect, disturbing DRAM, PC supply chains and the system builder channel in the region.

As widespread flooding has continued to cause devastation that has brought unprecedented ruin to the people and economy of Thailand, research firm IDC has revealed in its latest report that worldwide HDD and PC shipments through the first half of 2012 will be impacted.

IDC also stated that with operations disrupted at more than a dozen hard disk drive (HDD) factories in Thailand, damage to the global HDD industry is significant.

According to the analyst and research firm, in the first half of 2011, Thailand accounted for 40 to 45% of global HDD production. However, as of early November, nearly half of this capacity has been directly impacted by the flooding. In addition to assembly and component facilities being inundated with water, the industry faces work stoppages due to poor access and power outages. The full extent of the damage to the HDD industry factories will not be known until the floodwaters recede, although it is already clear that there will be HDD supply shortages way into the first quarter of 2012, said IDC.

“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, Hard Disk Drives and Semiconductors, IDC. “Some interesting production and partnering arrangements with customers can be expected as HDD vendors scramble to bring production back up.”

“The HDD shortage will affect smaller PC vendors and lower priced products most, including mini-notebooks (netbooks), emerging markets and entry-level consumer PCs,” added Loren Loverde, programme vice president, 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.”

Shailendra Rughwani, president of the Dubai Computer Group (DCG) agrees and said: “As DCG, we are more concerned about the smaller PC assemblers and system builders because any miscalculation on their part could lead to a disastrous outcome that could have a ripple effect on the entire channel,” he said.

Rughwani, added that although it’s still unclear as to when exactly the supply of hard disk drives will return to normal levels, any prolonged shortages will adversely affect the channel’s well-being in the Middle East region.

In the Middle East, the impact of the floods has already started to show in the channel with prices for HDD having gone up by more than 50%. Industry pundits say while the shortage will affect the PC and system builder channel more than the multinationals, the situation presents an opportunity for system and PC builders to develop their own local market.

Hesham Tantawi, vice president, Middle East, Turkey and Africa at components distributor Asbis, said the hard drive industry in Q4 will see its worst sequential decrease.

Tantawi said the shortages are expected to continue until the end of Q1 in 2012 as Hitachi, Toshiba and WD have all been affected by the floods.

He said this shortage is predicted to boost average hard drive disk pricing for dealers by 40 to 50% in the fourth quarter in the Middle East.

According to a report by analyst firm IHS iSuppli, Thailand-based hard drive manufacturers such as Western Digital and Toshiba have already been forced to halt production. In light of the stoppage, Western Digital may lose its number-one spot for most worldwide hard drive shipments in Q4, falling to third, stated IHS iSuppli in its latest report.

IDC stated that as the HDD industry begins to recover in the first quarter of 2012 and HDD prices stabilise by June, the industry will be close to normalcy in the second half of 2012. The analyst company added that this is the opportunity for larger PC vendors to capture enterprise accounts from smaller competitors and accelerate industry consolidation in faster growth markets.

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