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.
Hereís 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 itís 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 worldís 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 thatís 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 donít 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 wonít 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.
One hopeful sign: Monsoon season is over in most of Thailand. It starts again in May.