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Severe flooding in Thailand has left players in the semiconductor market reeling as companies struggle to assess the full damages and impact of this natural disaster. Thailand has developed into a strong base for hard disk drive (HDD) manufacturing companies. Companies such as Western Digital, the leading player in the HDD market, lost significant inventory and supplies in plants affected by the floods. These companies will also see significant long-term effects of the flooding, as factories and infrastructure may take years to fully rebuild. Even companies not directly affected by the flooding, such as Seagate – the number two player behind Western Digital – project difficulty meeting increased demand levels due to disruptions across the HDD supply chain. We will not have a clear understanding of these repercussions until the floodwaters begin to clear.
We also see the effects of this flooding reverberate across the market, affecting both suppliers and buyers of these IT peripheral manufacturing companies. Suppliers are seeing reduced demand for their products and rising inventory levels. Customers of these peripheral companies, such as Dell, Apple and Hewlett-Packard, have seen significant shortages in supplies and thus rising prices for these components.
VDC expects the effects of this crisis to continue through the first half of 2012 before we see HDD manufacturers recover to pre-flood levels. Until this time, we can expect to see shortages in the HDD market cause delays for companies producing devices that use this component. Semiconductor companies outside of Taiwan – particularly in India and China – may see rising demand in coming months, as companies work to offset the limited supply available from Taiwan – these companies will likely increase production for the first half of 2012 to satisfy this demand.
As with the tsunami in Japan, the local effects of the flooding have strongly impacted individuals and companies native to these areas. These companies’ customers have been monitoring the flooding situation and continue to implement significant efforts to adapt business operations and financial projections. However, even as we expect HDD manufacturers and affected markets to rebound more effectively in mid to late 2012, the lingering impact of the recession will likely suppress overall market growth in 2012 as affected regions gradually return to normal supply and demand run rates.