PC makers should 'brace' for drive shortages

Computerworld - With operations disrupted at more than a dozen hard disk drive (HDD) factories due to flooding in Thailand, PC manufacturers should prepare for significant supply shortages, market research firm IDC said Thursday.

Worldwide HDD shipments could suffer a 20% decline beginning in the middle of this month and extending well into the first quarter of 2012, according to a new IDC report.

In the first half of 2011, Thailand accounted for 40% to 45% of worldwide HDD production. As of early November, nearly half of Thailand's production was directly affected by the flooding. While production at some factories was halted due to flooding, the industry also faces work stoppages due to poor access and power outages.

The full extent of the damage to hard drive industry factories will not be known until the floodwaters recede, "although it's already clear that there will be HDD supply shortages into the first quarter of 2012," IDC stated.

John Rydning, a research vice president at IDC, reiterated what he told Computerworld earlier this month: Hard drive manufacturers will favor their high-margin products used in enterprise servers and storage systems. "But the HDD vendors can't neglect their smaller customers, whose business will continue to be important once capacity is fully restored," he said.

Prices for hard drives have already begun to skyrocket in some instances. Fang Zhang, a storage analyst with IHS iSuppli, said hard drive prices have increased significantly for system manufacturers and consumers, some by more than 30%.

IDC said the industry should be able to restore drive production quickly once the waters recede, but today's shortages will continue to constrain supply for an extended period. Hard drive prices should stabilize by next June, IDC stated, and the industry should be back to normal by the second half of 2012.

Because a large portion of PC shipments have already taken place for this quarter, the decline in total shipments for the fourth quarter is expected to be "less than 10%," IDC stated.

But in a worst-case scenario, total PC shipments could be depressed by more than 20% in the first quarter of next year.

IDC said there are opportunities for larger PC vendors to capture enterprise accounts from smaller competitors and accelerate industry consolidation, particularly in faster growth markets.

"The HDD shortage will affect smaller PC vendors and lower-priced products most, including mini-notebooks (aka netbooks), emerging markets and entry-level consumer PCs. However, even the largest vendors are expected to face HDD shortages, particularly for portable PCs where the market is more consolidated," said Loren Loverde, program vice president for IDC's Worldwide Consumer Device Trackers. "Nevertheless, the shortage will relieve some pressure on pricing and margins, and present some opportunities for strategic share gains among the larger players."

Lucas Mearian covers storage, disaster recovery and business continuity, financial services infrastructure and healthcare IT for Computerworld. Follow Lucas on Twitter at @lucasmearian or subscribe to Lucas's RSS feed . His e-mail address is lmearian@computerworld.com.

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