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Thai floods continue to affect supply chain in 2012

09 Jan 2012

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In 2012, the electronics supply chain is forecast by IHS to experience a 3.8 million-unit shortfall in PC shipments in Q1 2012 as brought about by the flood that took place in Thailand last year. The market research firm expects that global PC shipments will grow by 6.8 percent in 2012, down from the previous outlook of 9.5 percent growth. Worldwide PC shipments in Q1 2012 will reach 84.2 million units, down by almost 4 million from its earlier forecast of 88 million.

Image: Istockphhoto

Q1 reductions has forced IHS to lower estimates for total PC unit shipments in 2012 to 376 million, compared with the company's previous prediction of 399 million. The market research company says that this result is partly due to a shortage of hard-disk drives, along with weakening demand due to other factors such as the popularity of tablets. This year's shipments of notebook PCs—a segment that the hard-drive shortage affects and that competes with tablets—should rise by 10.1 percent, down from the previous forecast of 13.8 percent growth.

"The PC supply chain says that it has sufficient hard-disk drive inventory for Q4 2011," says Matthew Wilkins, senior principal analyst for compute platforms at the company. "However, those stockpiles will run out in Q1 2012, impacting PC production during that period."

IHS expects the hard-drive supply situation to begin to improve in Q1 but notes that it will take time to replenish the electronics supply chain. According to Bryan Ma, Associate Vice President, Devices & Peripherals, IDC Asia/Pacific, Thailand accounted for between 40 to 45 percent of worldwide HDD production in H1 2011. About 25 percent of this capacity currently has been impacted by the flooding. Ma said the impact on the PC business is that demand is going to outstrip supply as HDD inventories have already been exhausted by the end of November.

Satish Lele, Vice President for Consulting, Asia Pacific, at Frost & Sullivan, also agrees that the flooding had severely affected the HDD supply, adding that leading manufacturers such as Western Digital, Seagate, and Toshiba are now facing shortages of HDD units. "The shortage in Q4 is expected to carry forward until the next few quarters. OEMs like DELL, HP, and Apple are already seeing increase in pricing," said Lele.

The immediate effect of the HDD slump was felt in the PC industry. According to analyst firm iSuppli, HDD shortages will result in a 3.8 million-unit shortfall in PC shipments in Q1 2012. iSuppli expects PC shipments to reach 84.2 million units in the quarter, down from its initial forecast of 88 million.

The overall hard-drive supply will meet demand only by the end of Q3 2012. Many drive makers have moved production outside Thailand to supplement supply. PC shipments should rebound from the shortage in H2 2012. With the added production outside Thailand, the market for hard-disk drives could face an inventory surplus by the end of 2012 after facilities in the country return to full production.

In a related story from EDN Asia, some companies have already expressed intention to move production outside of Thailand. ON Semiconductor has decided to cease its probe, assembly and test operations in its SANYO Semiconductor sites – which have been suspended since early October – in Ayutthaya, Thailand, and plans to maintain limited production at its Bang Pa In site. The company has already outlined a comprehensive plan for the transfer of most its Thailand production operations to other ON Semiconductor owned facilities including sites in Malaysia, Philippines and China, and to some external subcontractors.




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