Massive flooding in Thailand finally appears to be relenting. But the long-term effects are only now beginning to be understood. Particularly in the semiconductor space, manufacturing delays could turn out to be worse than those from the spring earthquake and tsunami in Japan. Several predictions this week suggested there will be widespread delays in shipments of some basic components for virtually all electronic devices. The delays could reach into the second quarter of 2012.
Here’s a quick rundown of the situation as it stands today.
Most importantly, the situation is getting better after nearly three months of rising rivers. The floods have led to more than 500 deaths, as well as financial losses that could reach into the hundreds of billions of dollars. More than 50,000 Thais have lost their jobs.
Mercifully, the waters are no longer rising. But it’s far from over. The water still has to drain. It is still as deep as two meters in several areas around Ayuthaya, a plains region near Bangkok that houses several large industrial parks. It will be weeks still before many companies can make damage assessments.
The personal computer space has been hit particularly hard by the events. Thailand produces 40 percent of the world’s hard drives, and most producers, including the US giant Seagate Technology LLC (Nasdaq: STX), have factories in the affected area. This report from the Asia Sentinel, which has been following events from the ground, says that global disk drive shipments now look likely to fall by 51 million units this quarter, or just under 20 percent, and that global prices for disk drives could rise by 10 percent in 2012.
Most fourth-quarter production was completed before the disaster, and the current shutdown will really affect OEMs' abilities to lock in supply for first- and even second-quarter contracts.
With supply tightening, several OEMs are floating hints through the business press that large manufacturers will be able to muscle most of the supply of key components facing shortages -- disc drives being key. If that’s true, medium-scale manufacturers would be the ones to suffer.
From a retail standpoint, one result of the disaster could be a shift in the growing PC-versus-tablet war. Most tablets don’t have disc drives; should a drive shortage hit PC manufacturers hard, it could cut into their ability to keep items such as netbooks and laptops cheap enough to compete on the low end of the retail computing market. This is the market where tablet and smartphone manufacturers won’t feel the crunch.
The effects of the shutdown are being felt up and down the supply chain throughout Southeast Asia. In neighboring Malaysia, the cable producer PIE Industrial was not hit by the disaster, but it has not been able to ship orders to customers in the affected area, according to local reports. The company announced that its cathode ray tube business could fall 20 percent, in part because of supply chain disruptions with partners affected by the floods.
That reminds me of a friend that saw in the news how Thailand was being flooded and he said that what would become of rice exportation? Knowing that major food that they produce is rice which is accepted world wide; and I can imagine the impact this floods would have made on food supply chain?
We can't predict when natural disasters may happen, but when it does happen, it always affects many lives severely, as these floods had already took 500 lives and left 50,000 people unemployed. The worst part, it takes years to rebuild the entire country's economic stabililty, as the floods have a big blow on it.
Thanks Barbara. I should say for the record I'm not on the scene; I'm not even in Thailand. But it is wierd how little attention this has gotten, even from those who are, in theory, able to put people right there.
Marc--thanks for your on the scene reporting. EBN continues to get inquiries about the situation and it is great to point to our own site for some of the best information available. Outside of the supply chain, this tragedy has barely been mentioned in the mainstream media. And thanks for continuing to recognize the human toll associated with the floods. I hope we never neglect--we being the collective media--never fail to remember what's really important.
While no one can completely guarantee protection against natural disasters, but it's always important to have contingency plans especially if it's disasters like flood which are likely to occur every year. I think Thailand and other places with large amounts of rainfall should seek to develop industrial areas on highlands where the damage by rains and floods is minimum.
Whoa, didn't know about Thailand's floods until this morning. Real tragedy! monsoon season strikes again.
I was reading that theres a company in Thailand that produces most of the motors that hard drives use, so there's a definite advantage of having all the companies close.
10% price increase seems optimistic, after I read all the info.
This just casts my mind back to the rescent discussions on why manufacturers are trooping to China.
Hawk's question is important, in asking what other locations are available for manufacturers, we are also asking what other locations offer the same benefits as Thailand does, which also leads to the question: What benefits do manufacturers get from manufacturing in Thailand, and do they really have options.
I think by now we at EBN should have accepted the fact that there is more to siting a factory or outsourcing than the issue of cheap labor costs.
Honestly, Hawk, I wouldn't know if the companies would do better elsewhere, though, as you suggest some countries would love to have the opportunity to host them.
Flooding has affected two large high-tech industrial parks: Bang Pa-in Industrial Park and Navanakorn Industrial Park, where entire assembly lines are under water.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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