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Thai Floods Devastate Supply Chain

The floods that worsened this week across Thailand, Malaysia, and Vietnam are threatening to devastate the region's electronics manufacturers and assemblers, cutting important links to several international supply chains. Here's an update on where things stand for some key suppliers:

Malaysian Eng Teknologi, a hard drives supplier based in Penang, on the Thai border, has issued a warning to investors that flood-related stoppages are continuing and are now severe enough to put the company into the red for the fourth quarter. The ripples are already being felt up the chain. Partners in the Philippines have already reported slowdowns resulting from delayed shipments from Eng.

Two of three Sony plants in Thailand are currently closed. Similar closures have affected Hitachi, Seagate, and Canon, among others.

The primary facilities affected are two large industrial parks: Bang Pa-in Industrial Park and Navanakorn Industrial Park, both near Bangkok. Multiple reports say the flooding was so bad in Bang Pa-in that manufacturing equipment and entire assembly lines are under water today and will likely need to be extensively repaired or replaced before production can resume.

The difficulties in Thailand could not have come at a worse time for some sub-chains within Asia's electronics supply industry. An acute shortage of disk drives across the industry is almost certain to be compounded by these worst-in-a-century floods. Western Digital, or WD, one of the world's largest HDD supplies, reported a few days ago that it would be shutting production at all its Bangkok-area facilities. The shutdown represents the sudden idling of more than 37,000 workers, who shipped more than 50 million drives last year.

The camera and imaging industry has been among the industries with the most worrisome exposure to the disaster. The floods have come just as industry giants Nikon and Sony were finishing up production for the upcoming new model-year launches.

Nikon has tread cautiously so far, refusing to confirm or deny reports that the flood will push back the launch of new models of its popular APS-C series cameras. The company did say, according to several reports, that its factory in Ayuthaya, outside Bangkok, is under water to the second floor. Sony said its Asian customers will experience delays in two highly-anticipated new models, the A65 and NEX-7, but it has not finished evaluating whether its North American shipments will be affected.

The human cost of the floods is still being calculated. It's safe to say that several hundred thousand Thais and Malaysians who work in the assembly and manufacturing plants outside Bangkok and Penang have lost their livelihoods for the near term. With the disaster still unfolding, OEMs are making few predictions about the likely delays in restarting production in the affected areas, but it could be as long as another week before conditions on the ground improve enough for cleanup to begin. Delays of at least a month appear likely in many cases.

More than 300 people have died in the disaster so far across Southeast Asia.

25 comments on “Thai Floods Devastate Supply Chain

  1. Eldredge
    October 21, 2011

    Not welcome news for the electronics industry, or the people affected. Flood waters do a great deal of damage, and the longer it is before they recede, the worse the cleanup becomes. Hope they are able to get back to normal qucikly.

  2. AnalyzeThis
    October 21, 2011

    I am partners with one of the companies you've mentioned in this article, and they did indeed communicate to me that the floods were causing them to essentially suspend all their manufacturing efforts there and as a result, all their marketing plans as well. Horrible timing for them as it derails their holiday season efforts.

    But I'm a little surprised at how little mainstream media coverage these floods are getting. Had I not worked in electronics, I'm not sure I would have known anything was going on. I was also unaware of the human toll of this disaster, truly this seems like a much more significant tragedy to me now that I know that literally hundreds of lives have been lost.

    Anyhow, thank you for the report, Marc, and you've motivated me to try to find out more about this unfortunate situation.

  3. Tim Votapka
    October 21, 2011

    A flooded building doesn't get cleaned out quickly even if water recedes in a day or two. There's all kinds of bacterial and fungal issues afterwards. I'm curious: what are the safety standards like in the areas affected by the floods?

  4. FLYINGSCOT
    October 22, 2011

    It is devastating to see the poor people in this area struggling with the floods.  So many have died and many have lost everything they own.

    After what happened in Japan with the tsunami, these floods could not have come at a worse time.  I hope the people and companies in the affected areas rebuild and recover as soon as they can.

  5. prabhakar_deosthali
    October 22, 2011

    Here in India also there is hardly any coverage on TV or in newspapers about these floods.  From thhis blog it appears that the disaster is quite big in natureand in such natural disasters saving the huan life is the top most priority, everything else is put on the back burner.

    Since Thialand is not a country as advanced as Japan it may require a lot of international help and support to come out of this situation and restore normalcy in the day-to-day life and the affected businesses

  6. Houngbo_Hospice
    October 22, 2011

    @FLINGSCOT:

    “I hope the people and companies in the affected areas rebuild and recover as soon as they can.”

    The country's economy will be affected for sure as many businesses will have to close for a while. Even though some factories are still in operation, disruptions in supply chain will affect production. The best we can hope for is that the country could revover as fast as possible.

  7. Houngbo_Hospice
    October 22, 2011

    The hard disk drives factories located in Thailand have suspended their activity. That is the case of Seagate Technology who has warned that a disruption in its supply chain could affect production. 

    “As a result of the disruption caused by the floods, Seagate anticipates hard drive supply will be constrained throughout the current quarter,” the company said in a statement on Wednesday.” reports John Ribeiro  in his blog

  8. Parser
    October 22, 2011

    I had to search for news about this flooding. The main news has nothing about it, but it will affect global economy through interrupted supply chains and import export not even looking at tourism. 

  9. t.alex
    October 22, 2011

    It disrupts a great deal, not just electronics, but other supply chains, such as rice as well.

  10. Ariella
    October 22, 2011

    More than supply chains are affected. According to http://www.latimes.com/news/nationworld/world/la-fg-thailand-floods-20111023,0,5846621.story  “The government raised the death toll to 356 from Friday's 342. Two others are missing. An estimated 113,000 people have been displaced and are living in shelters. And the nation has suffered $3.3 billion in economic damage, a figure that could double if Bangkok is swamped”

  11. elctrnx_lyf
    October 23, 2011

    I just do not understand why there is no coverage of this news in the regular news media. I feel sorry for all the people who are suffered because of this and I belive they can come out of this disaster asap.

  12. Anna Young
    October 24, 2011

    Thanks Ariella for the link. I wonder why there was no coverage of this? Particularly where lives and livelihoods are involved.It is sad.

  13. Jay_Bond
    October 24, 2011

    If you were only paying attention to the mainstream news, hearing how devastating these floods are is new information. There is hardly any coverage of these terrible floods unless you go searching for it. That being said, these floods are going to set back the supply chain many months. This could seriously impact holiday sales and margins of large companies who have facilities in Thailand. Based on Thailand's economy and overall wealth, the country is going to need some international help to get things restored.

  14. dan.goddard
    October 24, 2011

    Hi Guys,

     

    As a former expat, I used to live in Bangkok. My wife is from Bangkok and we've been following these developments for a couple weeks. I'm surprised at the lack of coverage of this flooding in global media in general, because it's definitely on the mind of every Thai around the world. The rain has been coming for almost a month now.

    Here are links to two English-language Thai newspapers, which will provide a clearer understanding of the devastation.

    http://www.nationmultimedia.com/

    http://www.bangkokpost.com/

    Thanks, everyone, for your concern.

     

    –Dan

  15. JADEN
    October 24, 2011

    The recent natural disaster will definitely shake companies supply chains around the world.  Imagine China earthquake and Japan tsunami, this Southeast Asia flood is really a catastrophic event. The destructive impacts will affect not only individuals, families and communities but also economies.

  16. Anne
    October 24, 2011

    The floods have forced the closure of factories in the country that supply crucial parts to the region.  Many companies have halt their operations and they are even unsure of their condition.  I watched on BBC how the floods hit the country affecting several people, it is disastrous.

  17. arenasolutions
    October 24, 2011

    Thanks Dan, for sharing. It is interesting how little I have heard about this on the news, or even online in some of the more popular industry places.

    It’s difficult to be prepared for unexpected and unpredictable global events of this magnitude, and it surprising to me how many geological disasters we have been hit with this year. Suppliers and manufacturers all over the world have had to be especially resilient.

  18. Daniel
    October 25, 2011

    Marc, I think for the last couple of years south Eastern Asian countries are suffering by different types of natural calamities. But, directly it hadn’t put much effect in supply chain so far. When tsunami hits Japan this year (Q1), we may though it may bring a big impact or deficiency in supply chain, but nothing happened as we expected. So I don’t think this flood can have any better impact in supply chain.

  19. Himanshugupta
    October 25, 2011

    This calamity is the second worst in this year, if i remember correctly, after Japan's earthquake and following nuclear disaster. The supply chain is feeling the pinch. The natural disasters come and test the preparedness of the company so i see a silver line in the dark for the supply chain professionals.

  20. Taimoor Zubar
    October 25, 2011

    Even I was not aware of these floods in Thailand, and certainly not aware of the impact of these on electronics manufacturers. Sadly, the media coverage has been slow this time as compared to the coverage about the disaster in Japan.

  21. Ms. Daisy
    October 25, 2011

    Thanks Dan for the link you supplied. It is sad to see human suffering, but heartwarming to see the strength in human spirit. Marc and yourself have really been helpful to bring this to our awareness. Sure this will dampen the supply chain's recovery effort, but the there is always light at the end of the tunnel.

  22. maou_villaflores
    October 26, 2011

    With the current unpredictable weather and disasters, I think companies should always consider a disaster recovery plan just in order to avoid showstopper in their operation if a disaster happens.

  23. stochastic excursion
    October 26, 2011

    ft.com has a lead opinion piece on the broader vulnerability of the global supply chain.

    http://www.ft.com/intl/cms/s/0/30666134-ff33-11e0-9769-00144feabdc0.html

  24. Kunmi
    October 30, 2011

    2011 disaster events world wide are very alarming and are capable of denting the supply chain activities one way or the other.

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