Intel warns of HDD shortage, cuts forecast by $1B

With Intel cutting its fourth quarter revenue forecast, the chip maker now says microprocessor demand is declining and expects hard drive shortages to continue way into the first quarter of 2012.

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Intel warns of HDD shortage, cuts forecast by $1B This is a supply-driven shortage of HDDs, not a demand issue, says Smith.
By  Manda Banda Published  February 29, 2012

With Intel cutting its fourth quarter revenue forecast, the chip maker now says microprocessor demand is declining and expects hard drive shortages to continue way into the first quarter of 2012.

Chip maker Intel has reduced its fourth quarter revenue forecast due to hard disk drive (HDD) shortages caused by the massive flooding in Thailand. The vendor now expects fourth-quarter revenue to be around $13.7 billion, compared to the previously forecasted $14.7 billion.

The Thailand floods have been ravaging the country’s hard drive industry since October, and their adverse effects are starting to be seen within the worldwide PC supply chain. As hard drive shortages persist, PC makers are being forced to reduce their inventories and, as a result, microprocessor demand is declining, Intel said.

The company expects hard drive shortages to continue way into the first quarter of this year, with the rebuilding of inventories to occur throughout the first half of 2012.
In addition to a drop in revenue, Intel announced an adjusted fourth-quarter gross margin of approximately 64.5%, down slightly from the previously expected 65%. All other quarterly expectations, Intel said, remain the same.

The company stressed that its lower-than-expected microprocessor sales are purely supply-driven and in no way reflect a lack in customer demand. “This is a supply-driven shortage of HDDs, not a demand issue,” Intel CFO Stacy Smith said. “Our underlying view of demand is still intact.”

Smith also noted that, while the company is seeing a pretty significant reduction in PC chip segment, its server sales seem unaffected by the shortage. “We have seen no change at all in server order rates,” Smith said. What’s more, Intel still anticipates strong demand for its new Romely platform upon its launch next year.

Since October, Hewlett Packard, Dell, Lenovo, Acer and others have warned that they may build fewer PCs as they use up their current stock of hard disk drives and struggle to replace them.

Intel’s customers are reducing their stocks of chips in anticipation of the hard drive shortage.

The Thailand flood damage is expected to shrink global hard drive output by a third in the current quarter.

Hard drive manufacturer Western Digital has been hit hardest by the floods and has warned of tight global supplies into 2012.

The company expects a world shortage of 60 million hard drives in the December quarter of 2011.

Intel’s chief financial officer said that he expects the hard drive shortage to increase adoption of solid-state drives (SSDs) as the main storage devices in PCs. Currently the much faster, but more expensive SSDs are only used in high-end PCs such as Apple’s MacBook Air.

Western Digital, which hosted approximately 60% of its manufacturing plants in Thailand, offered a glimmer of hope earlier this month, announcing it had rebooted production at one of its Thailand facilities.

“The passion, perseverance, ingenuity and execution exhibited by the WD team has been extraordinary and enabled us to make substantial progress in partially restoring our manufacturing operations in Thailand, well in advance of our earliest expectations when the floods hit,” said John Coyne, president and chief executive officer of Western Digital, in a statement.

The restored WD production facility had been sitting under six feet of water since mid-October. The hard drive vendor said that it has commenced decontamination and restoration of its remaining Thailand buildings still submerged in water.

2022 days ago
Vinod Mehra

Hard-disk shortages are reflecting and impacting every ICT manufacturer including systems, chip and of-course the supply chain. Is this gap an opportunity for alternate technologies including SSD ?

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