Widespread flooding in Thailand will directly impact PC markets in the first half of next year, with worldwide shipments dropping by up to 20% in the first quarter compared to previous projections, IDC said in a research note over the weekend.
Thailand accounts for up to 45% of worldwide hard-drive production and the flooding has damaged more than a dozen hard-disk-drive factories, IDC said. Shortage of hard-drive parts could result in PC shipments falling short by 10% in the fourth quarter this year compared to previous projections, analysts said.
“PC prices may rise as a result of the prolonged and substantial effects of the flooding,” said Loren Loverde, vice president at IDC.
“We do think that there will be a PC price rise,” Loverde said. Hard drives are about 7% to 10% of the total cost of a PC, which while not substantial, could impact overall PC pricing compared to smaller components, according to Loverde.
“PC makers could offset the higher price by installing lower-capacity hard drives, Loverde said. “Solid-state drives (SSD) are an alternate storage option to hard drives, but have a very small market share.”
“The PC price rise may be felt during the holiday shopping season, which is traditionally when PC shipments get a boost. Netbooks and entry-level PCs, which are lower priced, will be particularly affected,” Loverde said. “The PC market is also thin on margins, so manufacturers may try to offset the hard-drive shortage and margin pressure by introducing a larger mix of higher-priced laptops and desktops.”
“PC makers have dealt with a history of component shortages, but a hard-drive shortage will be a larger shock to the industry,” Loverde said. “The hard-drive market is so consolidated in Thailand that the flooding will have a prolonged effect on worldwide PC shipments.”
IDC has not yet released new projections for PC shipments through early next year. “The revised estimates are being calculated,” Loverde said.
Thailand is the second-largest exporter of hard drives after China and severe floods have affected hard-drive production for companies such as Seagate and Western Digital. The floods, which have killed more than 500 people, have also affected semiconductor companies such as Microsemi and ON Semiconductor, it was reported.
The floods began in northern Thailand in July and have spread, with residents of some districts of Bangkok, the capital city with a population of 12 million, warned this week to evacuate.
The floods have also spread through the PC supply chain, research firm IHS iSuppli said in a research report last week. However, the impact “is not significant enough to have a measurable effect on overall semiconductor industry revenue growth,” iSuppli said.
Hard-drive prices will stabilise by next June and the industry should return to normal by the second half of next year, IDC said.