Analysts Expect HDD Prices to Increase by 10% in Fourth Quarter

From X-bit Labs: The flooding in Thailand is affecting the fabrication of several products and parts, including automobiles, car components, cameras, semiconductors and hard disk drives. The disruption to the supply chain is having an indirect impact in turn on the making of other products, including PCs, memory (DRAM), cameras and set-top boxes. As a result, in the short-term, HDDs will get 10% more expensive, but other consequences are likely to be more drastic, according to IHS Isuppli.

As a result of the flooding, the HDD industry in the fourth quarter will suffer its worst downturn in three years. HDD shipments in the fourth quarter will decline to 125 million units, down 27.7% from 173 million in the third quarter. The drop is the largest sequential decrease on percentage basis since the fourth quarter of 2008 when shipments fell 21.2% during the worst point of the last electronics downturn. IHS estimates that 30% of HDD production in the fourth quarter this year will be lost because of the disaster. This will result in a significant shortage of HDDs.

Because of the shortage, HDD inventories will be depleted and will cause average HDD pricing to rise by 10% in the fourth quarter compared to the third. Some industrial sources pointed out that hard drive manufacturers are about to increase their quotes on drives by 20% to 25% in the short-term future.

The downturn will be spurred by production disruptions and stoppages at the manufacturing operations of some of the world’s largest HDD makers, namely Western Digital Corp. and Toshiba Corp., as well at suppliers of key components. Thailand is the world’s second-largest producer of HDDs after China and is a major supplier of hard drive parts. Western Digital is likely to lose its status as the world’s largest shipper of HDDs, with its rank expected to fall two positions to third in Q4 2011, down from first place in the Q3 2011. Toshiba’s rank will increase to No.1 as a result of consolidation of Samsung and Seagate's HDD businesses despite of lower shipments.

In the PC market, the HDD shortage is likely to have the greatest impact on notebook PCs. The specific HDD plants affected by the flooding make devices designed for mobile computers. However, the PC industry appears to have sufficient stockpiles to last through the fourth quarter, so a disruption to notebook shipments in 2011 is not expected. Just the same, with HDD production disruptions expected to last at least six months, the shortage could impact PC production in the first quarter of 2012.

View: Article @ Source Site