Michael Grotticelli /
11.28.2011 12:22 PM
Thailand flooding causes disruptions in electronics supplies

To date, more than 600 people have died during three-months of catastrophic flooding in Thailand. Some 5.3 million residents are still suffering as monsoon rains and back-to-back tropical storms have hit 64 out of 77 provinces since late July.

A second casualty from the storm is the now global shortage of electronic parts made in Thailand, which is affecting the manufacture of a wide range of products. Affecting the broadcast industry mostly is the disruption of hard drives and analog and discrete semiconductors. This has disrupted the manufacture of set-top boxes, digital video recorders, notebook PCs, dynamic random access memory (DRAM) and various kinds of digital cameras.

Beyond Thailand, the most affected country is Japan, which maintains extensive manufacturing operations in areas affected by the disaster and is still recovering.

Industry analyst iSuppli estimated that about 30 percent of hard drive production in the fourth quarter this year will be lost because of the disaster, resulting in a significant shortage of HDDs. However, that estimate may have been too high. The HDD shortage may be short lived, other reports said, with supplies returning by December.

"Digitimes" reported that resellers said they hadn’t seen as much scarcity as expected and even had an oversupply of drives. They reportedly plan to drop prices next month to clear out stock.

However, the shortage has already affected companies like Pace, the set-top box manufacturer. It warned that its profits would suffer due to shortages. Many firms, including Pace’s main supplier Western Digital, have hard drive factories in Thailand. Pace said its profits next year would be down by up to $50 million, and the floods would knock $9.5 million off profits this year.

Kabel Deutschland, the cable network in Germany, said it is concerned for the continued supplies of DVRs from Thailand. It announced the “sourcing of HD DVRs at planned volumes is not secured over the next months, which creates uncertainty around DVR sales.” Recent suppliers of DVRs to KDG have included Sagemcom and Humax.

Sluggish PC sales may have helped the hard drive business by cutting back on demand for the storage. A poor economy has been a common factor, although Apple’s iPad has helped drain sales away from netbooks and budget notebooks.

Two major analog and discrete semiconductor suppliers — On Semiconductor and Microsemi — have also faced a significant impact from the disaster. Fellow suppliers Rohm and Toshiba have been affected as well. However, whatever direct impact there may be will be felt mostly in the Japanese market. This is because On Semiconductor has limited alternative sites in which to move the test and assembly of customized packages for Japanese customers.

The Thailand camera manufacturing operations of Sony, Nikon and Canon all have been disrupted or suspended by the flooding. As a result, IHS iSuppli anticipated that overall camera shipments will drop in the fourth quarter and possibly in the first quarter of 2012.

iSuppli reported that Thailand plays a significant role in the manufacturing operations of Japanese companies, with an estimated 1800 Japanese manufacturers operating in that country and 450 Japanese businesses located in seven flood-hit industrial parks.



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