The problems for the global PC supply chain caused by the flooding in Thailand are slowly receding, if not as fast as the floodwaters themselves.
Western Digital, the hard-disk drive maker hardest hit, said on Monday it was continuing to ramp HDD production and had resumed manufacturing on Sunday of sliders – a key component where the heads that read and write to a disk are mounted. Slider operations had been suspended since October 10.
WD also recorded a $199m charge consisting of $109 million of fixed-asset impairments and $90m for damaged inventory and other expenses, although this did not include any offset of a potential insurance payment.
The California-based company now believes it will be back to normal in Thailand – producing about 58m units a quarter – during the September quarter, and be at 60 per cent capacity during this quarter. It says its suppliers should be back to pre-flood levels in the June quarter.
The shortages have meant higher prices and John Coyne, chief executive, said moderately higher prices were set to continue.
“I think the fundamental difference in a post-flood recovered era versus pre-flood is that we will have created a more robust and more geographically dispersed supply chain, which will have some intrinsic cost increases relative to pre-flood footprint,” he told an analyst conference call.
“Additionally, in getting back the capacity wiped out by the floods, there’s been significant incremental spending by ourselves and by our supply chain and by the industry supply chain in general. And so we expect that, that incremental investment will be reflected in the costs that are carried forward into the future.”
So the industry has learnt its lesson about concentrating production of key components in one area and diversified. But once inventories get back to normal – by the first half of next year – prices will still be higher for PC makers and therefore consumers.
This could create a further opportunity for solid-state drive makers, who are making inroads in the new Ultrabook category for laptops.
However, Mr Coyne said he saw SSDs as having only very low single digits in percentage market share in a “mature ultrabook environment”. That goes against the conventional wisdom, although the latest Ultrabooks have been heavier than early models and hard-disk drives would perhaps make them cheap enough for the mass market.
Whatever, it seems hard drives will have a disproportionate say in the fortunes of the rest of the PC industry for some time to come.
