December 12th, 2011

Flooding in Thailand

The flooding in Thailand has had a catastrophic impact on the region’s people and economy.

As the affected area is also a hub of manufacturing for the technology market, the impact on the high tech business is particularly significant.

Thailand has done a great job in attracting foreign investment in the region which has resulted in a large number of high tech companies setting up factories in the area.

In the case of hard drives alone, the region has more than a dozen factories dedicated to the manufacturing of hard drives. In the first half of 2011, the region accounted for almost half the worldwide output of hard drives. Overnight, that massive manufacturing capacity disappeared.

Along with the actual flooding the region is also hit with power outages, transportation problems and a myriad of human and logistical problems. Estimates of the recovery cannot even begin until the flood water recedes, but early estimates run between three to nine months before factories return to normal production. The range of products impacted is more than hard drives. They include automobiles, accessories, computers, cameras, printers and more.

Since hard drives are vital to the manufacturing of computers, the extended impact is felt by a lot more than the hard drive market. Shortages in hard drives are directly causing shortages in desktop computers, notebooks, netbooks and tablets. Prices of hard drives, on the spot market, has increased close to 300% in the past few weeks and supply is drying up. The servicing of computers may also be delayed as service depots fight for supply of hard drives.

Fortunately, some of the manufacturers we deal with had a stock of hard drives that they can use for this season’s computers. So far, the impact has not been as desperate as it could have been. Others are shifting their production elsewhere in the world to make up the difference, but that will take time. Still other factories may have to be rebuilt from ground up.

In the meantime, product shortages and price increases are going to be the norm for foreseeable future.

Written by Cedric Tetzel
Computers Merchandise Manager of London Drugs

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