Computer makers caught in wake of Thai floods

Computer prices are set to rise following warnings by Acer and Samsung Electronics that severe flooding in Thailand would hit production and that they would pass resulting higher costs on to consumers.

The comments are the most serious indication from technology groups that Thailand’s worst flooding in half a century, which has claimed hundreds of lives, will disrupt the global supply chain just ahead of the busy end-of-year season.

Tens of thousands of people have fled Bangkok, which accounts for 40 per cent of the nation’s economic output for fear of further flooding this weekend.

The biggest impact has been on the production of computer hard disc drives – key components whose prices have risen by up to 20 per cent since the floods began. But other industries have also been hit. Toyota, Honda and Nikon have all reported disruption in their operations and Sony said it would delay the launch of some of its new cameras due to the damage to production sites.

Acer, the world’s fourth-biggest PC maker by volume, said it expected fourth-quarter sales to be 5-10 per cent lower than the previous quarter because of the floods. It had 10.6 per cent of the global PC market at the end of the third quarter, according to Gartner.

Samsung, meanwhile, which has sizeable PC sales but is not in the top five, said that it expected supply shortages due to the floods, although it believed its own computer sales would not be hurt badly. Lenovo and Asustek have also warned that the PC industry generally would be hit by component supply shortages.

Roughly a quarter of global hard drive assembly facilities are located in Thailand, according to industry tracker iSuppli, which estimates that supply would be constrained at least until the fourth quarter of 2012. Western Digital, the world’s biggest hard disc drive maker, has closed all its factories in Thailand.

The impact on global hard disc drive production is severe not just because the biggest producers such as Western Digital are in Thailand, but also because a host of smaller component suppliers are clustered in nearby industrial parks.

JT Wang, Acer chief executive, said “the whole PC production chain is stuck at a bottleneck” because of the constraints on hard disc supply.

“This is not a problem that we can solve by ourselves and so we have started raising prices” to transfer the cost to customers, he said.

Samsung said PC sales would be hurt generally, which would depress prices for D-Ram memory chips, which are a key PC component and a big revenue contributor for the South Korean company.

“We expect PC sales to be lower than expected. As a result, we expect weakness in D-Ram prices,” a Samsung executive told a conference call on Thursday.

The global tech supply chain has about two months’ worth of hard disc drive inventory available. Analysts and executives say that the full impact of the Thai floods on manufacturing will depend on how soon flood-hit areas can resume production.

“If component suppliers are able to either recover Thailand factories or shift production to another location by the end of December, we believe the impact to PC companies will become more muted by the end of the March quarter,” Morgan Stanley analysts wrote in a note.

Additional reporting by Song Jung-a in Seoul

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