Flooding in Thailand will deter hard drive market through Q3

Summary:Following floods in Thailand, analysts predict that we'll see higher prices throughout the hard drive shortage through at least the third quarter of 2012.

The flooding disasters in Thailand that started last year didn't have overwhelming impacts on December quarterly earnings for most hard drive disk manufacturers, but that is surely going to change going forward in 2012.

A complete recovery of production won't happen for months, according to new research from IHS iSuppli.

IHS storage analyst Fang Zhang explained in the report that a recovery for HDD manufacturers has already gotten underway and is expected to ramp up progressively each quarter. Nevertheless, supply and shipments are not expected to return to typical annual growth until at least the third quarter of 2012.

Thus, we are going to see inflated prices for hard drives as most inventory will be very low, and this will likely be the only way that hard drive manufacturers will be able to make it through this crisis.

Prices will remain high for a number of reasons, including the higher costs associated with the relocation of production, as well as higher component costs because of flooding impacts among component makers. Furthermore, PC brands have signed annual contacts with HDD makers that have locked them into elevated pricing deals for the rest of the year.

Yet shipments are expected to increase no matter what. Take a look at the graph below:

Analysts predict that Q1 shipments will increase by 13 percent, "a dramatic turnaround from a 29 percent plunge in the fourth quarter of 2011." After that, shipments will continue to grow by 14 percent in the second quarter, 11 percent in the third quarter, and only 4 percent in the fourth quarter.

Chart via IHS iSuppli


Topics: Hardware


Rachel King is a staff writer for CBS Interactive based in San Francisco, covering business and enterprise technology for ZDNet, CNET and SmartPlanet. She has previously worked for The Business Insider, FastCompany.com, CNN's San Francisco bureau and the U.S. Department of State. Rachel has also written for MainStreet.com, Irish Americ... Full Bio

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