LOS ANGELES — Monsoon floodwaters that have devastated parts of Thailand will cause a nearly 28-percent drop in hard disk drive (HDD) production in the fourth quarter, threatening to disrupt computer manufacturers before the end of the year, according to a report by research firm IHS iSuppli. Providers of electronic security products, including DVRs, servers and other storage solutions, will also be affected, sources say.

Thailand is the world’s No. 2 maker of HDDs after China and is a major supplier of hard drive parts. Western Digital, Seagate, Toshiba, Hitachi GST and Samsung each have disrupted HDD factories in Thailand, where flooding has killed several hundred people since July.

Some security product vendors have already taken action to mitigate supply shortages and rising prices as existing HDD inventories are quickly being gobbled up. Optiview, a nationwide CCTV equipment distributor and manufacturer based in Jacksonville, Fla., said it scrambled in late October to purchase and stock as many hard drives as it could.

“We have done everything we can to prepare for this shortage. We even drove all over the city and bought every hard drive on the shelf that people would sell to us,” says Optiview President Dave Page. “We paid double for these drives, but we’ve got to have them available for our customers.”

Tom Grossholz, a manager with Southeastern Leasing & Equipment Corp., says his company has less than a two-month supply of HDDs, which it puts into standalone DVRs. The firm installs CCTV equipment it leases to small businesses in eastern and Midwestern states. Procuring future supplies remains uncertain, Grossholz says.  

“Prices have doubled, if you can even get them. Some parts distributors will limit you to only one or two. I tried to order 100 hard drives [in late October] from a supplier and they canceled that order and told me, ‘I can only give you 50.’ They don’t want to sell any of them to resellers,” he says.

HDD shipments in the fourth quarter will decline to 125 million units, down 27.7 percent from 173 million in the third quarter, resulting in a significant shortage of HDDs, and an increase in price of about 10 percent compared to third quarter prices, iSuppli said.

In October, Toshiba and Western Digital announced the temporary shutdown of their factories in the country, while Seagate said the supply of components to its factories in Thailand was interrupted. Because of the extensive impact on its operations, Western Digital is likely to lose its status as the world’s largest shipper of HDDs, with its rank expected to fall to third in the fourth quarter, iSuppli said.

Western Digital provides hard drives for security vendors such as Exacq Technologies, an Indianapolis-based provider of video management system (VMS) and storage solutions. While it continues to closely monitor the impact to the global HDD supply chain, Exacq Marketing Communications Manager Roger Shuman says the disruption would not affect its business.

“We don’t see any reason why we won’t be able to meet our customer demand with regard to hard drives. We are prepared,” he says

To prepare for a potential extended supply chain shortage and price increase, Page is advising installing security contractors to formulate contingency plans to protect their bottom lines.

“We are recommending to our customers that they purchase the least amount of hard drives per DVR that they can get the job done with. In a few months the prices should come down again. Then they can install more hard drives in the DVR when it’s more economical to do so,” he says.

 

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