The humble hard disk drive may become a more precious commodity in the coming months, according to analysts and Apple.
Apple CEO Tim Cook made this very clear this week in the company's earnings conference call, referring to the impact of the floods in Thailand. "Like many others, we source many components from Thailand and have multiple factories that supply these components. There are several factories that are currently not operable, and the recovery timeline for these factories is not known at this point," he said.
Cook continued. "We would say that our primary exposure is on the Mac...I'm virtually certain there will be an overall industry shortage of disk drives as a result of the disaster," he said.
Analysts at DisplaySearch and IHS-iSuppli chimed in this week with warnings too, centered on drive motor maker Nidec, which supplies between 70 percent to 80 percent of the hard disk drive motors. "The floods are expected to limit the hard disk drive motor supply coming from maker Nidec, which has about 80 percent share of the market," Richard Shim of DisplaySearch wrote this week. (Note: iSuppli says 70 percent.)
Nidec is a supplier to all the major hard drive manufacturers, including Hitachi, Seagate, Toshiba, and Western Digital, wrote Shim.
And there is an impact beyond Nidec because Thailand is a global hub for production, as Apple's Cook pointed out. Hitachi, Toshiba, and Western Digital have HDD plants in Thailand that have curtailed production because of the supply shortage, according to Shim.
Thailand accounts for about 25 percent of worldwide HDD production, according to iSuppli.
But warnings about production aside, what's the bottom line on supply and prices? "Typically, notebook brands carry up to four weeks of hard disk drive inventory to respond to market dynamics and logistics...some brands were leaning towards the lower end of inventory ranges, two to three weeks, for most components," wrote Shim, referring to the fourth quarter. (See current Newegg HDD pricing.)
And in a phone interview on Friday, Shim said that in the short term, prices should not rise, at least not considerably. "In the short term, no. Because most of the brands have several weeks [inventory]. But if it becomes this perfect storm of events where there is a lot of demand and the flooding continues to have an impact, then we could have a problem," he said.
If there's one company to watch, it may be No.1 Western Digital (WDC), according to IHS-iSuppli.
"WDC, the world's largest HDD manufacturer in terms of volume, has 37,000 workers in Thailand, and production in the country accounts for 60 percent of the company's total capacity. WDC in the second quarter made 53.8 million HDDs, giving it a 32 percent share of the global market," said iSuppli.
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