Thailand Flood Disruption on HDD Market to Last More than 3 Months

Seagate may have said that its operations weren't disrupted overmuch by the floods in Thailand, but it looks like it has its own share of problems which, added to all other HDD woes, may be problematic in the near to mid term.

Seagate has two Thailand facilities, which make head stack assemblies, head gimbal assemblies and complete HDDs.

Even if they weren't shut down, however, Seagate will still have to face shortages of externally-sourced components.

"Our production is not constrained by either internal components supply or by our ability to assemble finished product; rather, we are constrained by the availability of specific externally-sourced components,” said Steven Luczo, chief executive officer of Seagate.

“If these component constraints are resolved result by the end of the December quarter, we expect to exit the quarter with a production capacity of at least 60 million units for the March quarter, excluding any additional capacity from the Samsung acquisition. Assuming no component constraints, we would expect additional capacity of at least 10 million units associated with the Samsung acquisition.”

Seagate recently got a green light from the European Commission to buy Samsung, which gives it the second greatest share in the HDD market (Western Digital has the largest share).

Nevertheless, with its supply impeded, and with component shortages expected to last some time, the company expects the HDD market to be undersupplied for more than one quarter.

"Our business priority is to work with our external component suppliers, supporting their efforts to rebuild the supply chain as quicky as possible,” Luczo said.

“We expect to experience significant impacts to our production levels, while our suppliers work together businesses up and running. Given the severity of the situation and the expense of supply constraints caused by the disruption, including those described by our primary competitor, the effects on our industry are likely to be substantial and will extend over multiple quarters,”