Thursday, December 15, 2011

Natural Disaster Risk Thailand Flooding Case Study – HDD Supply shortage rising prices, Major PC Makers cut production


Thailand worst floods in 50 years have created massive shortage of Hard Disk Drives in the market. Thailand is the world's second-largest producer of HDDs and accounts for 45 % of worldwide hard-drive production that include 2.5inch drives that are key components in personal computers. More than 25% of the world’s HDD assembly facilities are located in Thailand’s flooded areas. Seagate, Western Digital and Toshiba are the major manufacturers for HDD and have extensive production facilities in Thailand that are affected. IHS iSuppli and IDC have predicted that the overall shortage due to the flooding will reach 25% to 28% over the next six months. According to IHS iSuppli, the Thai floods will cause a 3.8 million shortfall in PC shipments in first quarter (JFM) of 2012. Total PC shipments in 2012 will be affected by the first quarter shipments fall and some even predict the shortages will continue till 2013 and this will likely mean higher prices and a reduction of the total number of PCs manufactured as well.

Digital Trends had reported that the prices of some hard drives have increased as much as 180%. Using the ten best-selling hard drives in Britain, France and Germany as a benchmark, Idealo claims that from the start of October to mid-November the lowest average price increased by 151% which means prices increased at an average rate of 5.4% per day. But since December prices are seeing significant decreases and consumers should expect fourth-quarter prices to be at least 30% higher than third-quarter prices. Supreme Distribution (Thailand DTK brand), expects prices of entry-level HDDs with a capacity of 500GB to 1,000GB to have increased by US$9.5 to US$12.7 or 20%. SVOA, a local computer maker and distributor, said HDD prices rose by 25% in the market in the later part of November and the shortage was continuing. Gartner predicts the end user price for HDDs will increase by 5 to 20% by the end of first half of 2012, and will only begin to ease in second half of 2012. The HDD costs trends will move to a 5-20% increase in costs in 2012.

HDD cost is around 7-10% of total cost and the rise in price of HDDs will lead to personal computers price also rising. Some of the PC makers like Acer and Samsung have indicated in rising prices and pass on the cost to the consumers. But HP is looking to absorb costs related to HDD price increases for as long as possible. The exorbitant HDD prices in November 2012 is because panic buying by the major PC makers, drastic fall in the production due to sudden flooding and manufacturers reporting major fall in production numbers and also there was talk of consumers being fleeced by some resellers citing the drastic shortages. But the prices almost corrected to normal levels of 30% price rise. Major PC makers have realized that the shortages cannot be overcome by the manufacturers and they have only one option of cutting down their production and accordingly all the PC makers including the chip makers have issue revenue and profit warnings for fourth quarter and next year. The external hard disk market where customers buy hard disks for external storage had also rose significantly and they are postponing their purchases till the prices come down to normal levels. 

3 comments:

  1. case study is very short

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    Replies
    1. Hi

      This was a follow up case study. Three prior versions have total data. Please find them here.

      http://analysiscasestudy.blogspot.in/2011/11/natural-disasters-affect-on-business.html

      http://itbizcharts.blogspot.in/2011/12/natural-disaster-risk-to-business-case.html

      http://itbizcharts.blogspot.in/2011/12/natural-disaster-risk-to-business-case.html

      Thanks

      Delete
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