Western Digital’s 3rd quarter profit expected to fall by 60%.
Thailand makes about 40% of the world’s hard drives, with a whole lot more components supplied to other countries for manufacturing hard drives. As such, the severe flooding in the country caused by three months of monsoon rains that has left over half a million people out of work and over 14,000 factories close, will have some extreme implications on the technology industry.
Source: This Is My Next.
Western Digital is one of the hardest hit companies that has the majority of production lines in the flooded regions. CEO John Coyne claims that the 3rd quarter profit for the Western Digital ending in December, will be 60% lower than last year. And according to their COO Tim Leyden, the problems will “continue into the March quarter and beyond.”
One of their main competitors, Seagate, on the other hand, got very lucky with none of their plants being affected, and operating at full capacity. However, their luck may soon run out as Seagate’s suppliers have also been hit very hard by the flooding. CEO Steve Luczo said last week during the earnings call that “the flood disaster in Thailand is having a widespread impact on individuals and businesses of all types, including the hard drive industry, disrupting transportation, logistics, power generation, and the availability of labor.”
Apple CEO Tim Cook responded to an anlysts question, according to ZDnet, saying that, “There are several factories that are currently not operable, and the recovery timeline for these factories is not known at this point. As you can appreciate, the weather really hasn’t allowed an ability to assess those. From the work that we have done, we would say that our primary exposure is on the Mac because as you point out, of the number of drives or drive components that are sourced in or in Thailand is a significant portion of the total worldwide supply of drives. And so I can’t give you a precise accounting. It is something that I’m concerned about. We do expect — I’m virtually certain there will be an overall industry shortage of disk drives as a result of the disaster. How it affects Apple? I’m not sure.”
For now it seems all doom and gloom for the forseeable months as the PC industry as a whole braces for hard drive shortages and component price increases.