Western Digital Restarts Production
CRN Update from Joe Kovar
December 2, 2011
Western Digital late Thursday night (Dec 1st) said that the rebooting of its Thailand hard drive manufacturing in the wake of devastating floods in that country has commenced earlier than expected. However, Western Digital echoed rival Seagate´s warning from earlier this week that hard drive supplies will remain constrained through at least the first half of 2012. Western Digital also updated its pending acquisition of rival Hitachi Global Storage Technologies with word that it expects to close the transaction before March of 2012. The hard disk shortage was caused by massive monsoon floods which inundated much of Thailand, including many of the industrial parks where hard drives and components are manufactured. Analyst firm IHS iSuppli estimated that about 25 percent of the world´s hard drives are manufactured in Thailand. In addition, a disruption in the production of key components, including electric motors and slider assemblies, has slowed part of the production in other countries, leading both Western Digital and Seagate to estimate that fourth quarter production of hard drives will top out at about 120 million units, compared to normal expected demand in the quarter of 180 million units.
Western Digital, which depended on Thailand for about 60 percent of its hard drive production, said it restarted production in that country in one of its facilities a week ahead of its internal schedules. That facility had been submerged in about six feet of water since mid-October. The company has also moved manufacturing equipment for sliders, a key hard drive component for hard drives, from that facility for decontamination, and expects slider production there to restart during the first quarter of 2012 at about the same time it plans to open a similar facility in Malaysia. Other Western Digital facilities in Thailand are still under about two feet of water, and refurbishment will commence after they are pumped dry, which the company estimated will take another 10 days.
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Rising prices and supply chain uncertainty from the Thailand flooding have already started to adversely impact the storage industry as a whole. In mid-November, top executives from such storage vendors as NetApp, Dell, and Overland Storage, who normally might not be expected to comment on supply chain issues, were forced to address the hard drive situation as part of their quarterly financial reports. NetApp, during its second fiscal 2012 quarter financial conference call, said the company has been building up enough inventory to last through the end of the year, but the impact of the shortage is still unknown... Jeffrey Clarke, Dell vice chairman of global operations and end user computing solutions, said during Dell´s fiscal third quarter 2012 financial report that the storage industry is in a hard drive allocation situation.
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