Thailand Hard Disk Drive production – cost and supply implications

Our friend at Probrand,  Iain Bowles, who knows more about IT supply chain issues than anyone we’ve ever met, writes about the effect of the recent floods in Thailand.

As Thailand starts the recovery process and takes stock of the worst flooding on record, the supply of Hard Disk Drives (HDD) is forecast to become difficult  and expensive. And the global impact is forecast to be significant shortages of this vital product in the first quarter of 2012 as the disaster hits the manufacturing supply chain.

The picture is becoming clearer as the companies suffering in the floods start the process of cleaning up the plants, repairing damaged equipment and in the future re-starting production. The quarter starting in October and finishing in December has a demand rate of 180 million units, while the production volume is going to be in the region of 100 – 110 million.

The key to the production volume is Nidec, the base plate and spindle motor supplier.  Nidec produce 60 million spindle motors per month in Thailand, China and the Philippines, with 7 plants in Thailand producing base plates and spindle motors.  One was not flooded, 3 plants  have re-started production, with 3 still in the pump-out phase.  It is estimated that it will take approx 30+ days  to clean up the plants repair the machinery  and re-start production.

Nidec are saying they should be able to produce 60,000,000 spindle motors per month  in the Q1 2012 - they are moving as much production as possible to China and the Philippines, and have leased another plant in a non-flooded area to help re-start production.

The next issue is that the spindle motors are one part of the process that will allow Seagate to maximise its production capability in their non-flooded plants.

Western Digital and Toshiba are two other suppliers with flood damage, and they have still to pump out the plants and start the repair process.  These two manufacturers represent a total monthly volume of approx 23 million per month.  Both are working to increase volume at other plants, but there are no clear forecasts of the start of production or the return to full volume, and there are comments that the full recovery process could take as long as six months from pump dry.

Pricing in the UK is already showing large increases with a typical £30 drive now priced at £90 minimum. In China, assembly plants are now at critical stage with limited stocks of drives constraining production of laptops in particular, anywhere the 2.5” form factor drive is used. Inevitably, the hard disk pricing will result in increased costs for laptops and similar items; we are starting to see price increase at the start of November.

Are solid state disk drives a solution? Maybe, but not for some time, as production will need to be ramped to meet the increase demand for memory chips. That ramp is approximately a 10 week production cycle time.

The questions that will now be asked are; which products will be built, who will the production runs be allocated to; and when?  Products such as Netbooks look very vulnerable, as they are low profit margin, low value add units.  The typical Netbook has a 250Gb drive that can be used in any laptop of higher value product hence these units are probably one of the first casualties of the shortage of hard disks.     Similarly external hard drives have little added value – so better to add value in a laptop or desktop.

Flood control in Thailand are saying that the flooded areas will be pumped dry in the next few weeks. We will then see a clearer picture on the recovery process in the Western Digital and Toshiba plants. But the question is: when will the hard disk industry be able to deliver 60 million disk drives per month again ?

The second question is at what price? How quickly will pricing for both key components and complete laptops return to the pre-flood levels?

Voices (4)

  1. Rob Elmore:

    Iain–

    As you say:

    “But the question is: when will the hard disk industry be able to deliver 60 million disk drives per month again ?

    The second question is at what price?”

    With those questions in mind, TechCycle3.com is asking IT managers with large server operations:

    Which is your data center’s standard practice for disk drive replacement?
    A. Replace disk drives individually only as they fail.
    B. When one disk drive in a rack fails, replace all drives in that rack.
    C. In addition to replacing disks when they fail, replace each disk after __ months of use.

    If you answered B or C, and with the Thailand floods threatening through much of 2012 to limit availability of new disk drives and to substantially raise their prices, has your organization considered not destroying any working disk drives you remove?

    Instead you have a new option to securely delete all data and recertify them for reuse in your data center with warrantied reliability – a service outlined at http://www.techcycle3.com

    –Rob Elmore
    TechCycle3

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