The floods in Thailand and their effect on IT supply chains

Our friend at Probrand,  Iain Bowles, who knows more about IT supply chain issues than anyone we've ever met, says that the effect of the floods in Thailand could be as great as the Tsunami for certain products. In particular, hard disc drives are an issue. Here is Iain's alert on the topic.. and our sincere best wishes to anyone affected by these events.

Disk Drive Status

Shortages and pricing issues will disrupt the market for at least the next 3 months with the probability of up to a 6 month period of recovery. Thailand is a significant centre for the production of disk drives and more importantly disk drive components.

Thailand BASED Nidec builds 70% of the spindle motors used by the top 5 hard Disk producers. The 5 companies are:

  • Western Digital  - Production of approx 10M drives per month in Thailand stopped
  • Seagate - Still producing but will face supply chain issues
  • Hitachi - Still producing but will face supply chain issues
  • Toshiba / Fujitsu - Production of 50% of their HDD production is in Thailand stopped
  • Samsung - ?

Seagate is still in production but expressing concern about the component supply chain, as is Hitachi. Western Digital and Seagate are due to update their status in their regular SEC investor update this week.  The amount of information available will be limited until they make their financial position clear and forecast the recovery period.

In terms of semi conductors, we are now in a position where stock in the supply chain is high - in fact, higher than when the Tsunami hit. That is good news but the big risk area is Nidec and the two suppliers that represent 60% of the world production of Hard Disks, namely Western Digital and Seagate.

Scale and recovery

The size of these facilities is large. Western Digital has over 30,000 staff in Thailand, the total employee base in Hard Disk and component production in Thailand is over 200,000 people. These plants work round the clock. The production process is very intensive in terms of clean rooms; recovery from floods in this type of production facility tends not to be fast. There are early indications that recovery may take between 2 to 6 months.

As the second major catastrophic event of the year, following the Tsunami in March, the Thailand floods will surely test the recovery systems of suppliers and the special equipment needed to return such facilities to full production.

Japan has an impressive recovery plan to deal with earthquakes. Indeed, key roads were repaired within days of the Tsunami allowing equipment to be moved in quickly to speed up the manufacturing repair cycle. Does Thailand have this capability? Will Thailand and its suppliers be able to recover as quickly as Japan post Tsunami?

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