Floods in Thailand have rattled the hard drive supply chain from component suppliers to giants like Western Digital and ultimately PC and server makers will be affected, say analysts. Thailand's disaster has shut down 14,000 factories, flooded hundreds of thousands of homes and put more than 660,000 out of work.

Last week, the impact of the flooding in Thailand played out very differently for hard drive giants Western Digital and Seagate, but shortages will loom into 2012, say executives.

Western Digital CEO John Coyne said that the company's December quarter revenue will fall 60 percent from a year ago since the company has a high concentration of supply chain factories in flooded areas.

Recovery for Western Digital, which includes helping many of its workers affected by the floods, will be a multi-quarter task. Western Digital operating chief Tim Leyden said last week during the company's fiscal first quarter earnings call that the hard drive industry will see tight supplies for a while.

Dear Customers

As the full impact of the flood situation in Thailand becomes apparent we will attempt to keep you informed via updates and how that will affect us and you.

The situation continues to be very dynamic because the weather is still adverse and high water from the last two weeks rainfall is still due to pass through Bangkok and the situation may worsen further.  

Whilst not all factories have been impacted the component supply chain has been badly making it extremely challenging to make any reliable predictions.

What we do know is that until the situation stabilises major manufacturers can only provide direct customers 1 weeks supply.

Major manufacturers are attempting to source components from suppliers that have not been impacted but there are limits to what can be done. To put some perspective on that... the largest spindle motor manufacturer in the industry produces around 80% of all Hard Drive motors, currently two facilities represent 60% of total output. Both have been shut as they’ve been compromised by water.  Even with the most optimistic recovery plans the minimum impact will be 25million spindle motors this quarter alone. 

Both WD and Seagate estimate the impact of the Thailand situation could span the next few quarters.

We will do anything we can do to minimise the impact but the current situation is unprecedented and will imply a high degree of volatility and we do unfortunately expect the supply situation to get worse in the weeks to come.

RMA warranty replacement Hard Drives will be affected due to industry wide cost price increases which have already doubled in some cases.

With immediate effect we propose to offer the following service with regard to warranty replacement Hard Drives: where availability allows we will offer a replacement at the current market price but credit the Drive you are returning at the price you originally paid for it.

Alternatively you’re obviously welcome to receive a credit for that Drive once returned if it’s still within warranty and purchase a replacement elsewhere. 

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