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HDD shortages will hit PC market

by Stuart Wilson, Friday 11 November 2011

Research house IDC has lowered its outlook for hard disk drive (HDD) and PC shipments. The reassessment comes in the wake of unprecedented flooding in Thailand that has paralysed the production facilities and supply chains of major components vendors. IDC reckons that total PC shipments could be down more than 20% on previous forecasts in the first quarter of 2012 as a result of the HDD shortage.

"In response to the crisis, priority will be given to the large PC manufacturers that drive HDD shipment volumes as well as to the high-margin products used in enterprise servers and storage," said John Rydning, research VP for HDDs and semiconductors at IDC.

"But the HDD vendors can’t neglect their smaller customers, whose business will continue to be important once capacity is fully restored. Some interesting production and partnering arrangements with customers can be expected as HDD vendors scramble to bring production back up while simultaneously angling for a strategic advantage," he added.

According to IDC, most HDD shipments for fourth quarter 2011 PC production have already taken place, meaning that there is adequate inventory for this period. The research house reckons that the impact on fourth quarter PC shipments will be less than 10%.

The floods in Thailand have disrupted operations at more than a dozen HDD factories. In the first half of 2011, Thailand accounted for between 40% and 45% of worldwide HDD production. As of early November, nearly half of this capacity was directly impacted by the flooding.

In addition to assembly and component facilities being inundated with water, the industry faces work stoppages due to poor access and power outages. The full extent of the damage to HDD industry factories will not be known until the floodwaters recede, although it’s already clear that there will be HDD supply shortages into the first quarter of 2012, according to IDC.

IDC warns that PC vendors should plan for and expect significant HDD shortages by mid-November 2011 that will continue into the first quarter of 2012. HDD prices will also rise as demand exceeds supply and manufacturers face increased costs for components, expedited shipments, and shifting of production to new locations.

The HDD industry will begin to recover in the first quarter of 2012, according to IDC, and HDD pricing will stabilise by June, with the industry running close to normal in the second half of 2012. IDC believes that the situation will create opportunities for larger PC vendors to capture enterprise accounts from smaller competitors and accelerate industry consolidation, particularly in faster growth markets.

"The HDD shortage will affect smaller PC vendors and lower priced products most, including netbooks, emerging markets and entry-level consumer PCs,” added Loren Loverde, programme VP for IDC worldwide consumer device trackers.

“However, even the largest vendors are expected to face HDD shortages, particularly for portable PCs where the market is more consolidated. Nevertheless, the shortage will relieve some pressure on pricing and margins, and present some opportunities for strategic share gains among the larger players," Loverde added.

The impact of the floods in Thailand on the PC and components channel is just one of the issues that will feature high on the conference agenda at DISTREE EMEA 2012 www.distree-emea.com.

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