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Thai Floods Unlikely to Cause Hard Drive Price Rise Soon

Thailand's worst flooding for half a century is unlikely to cause significant hard drive price rises despite shortages revealing weak points in the global supply chain, drive vendors have indicated.

For now the problems look to be acute but probably short term in a country that is number two in global drive production.

The largest vendor in the country, Western Digital, has had to stop production while number two Seagate has said it is worried about a shortage of parts. Toshiba has also stopped production but said it would switch production to its Philippines plant.

PC maker Lenovo said that it was worried about hard drive supply once inventory is exhausted, which could cause shortages in the first quarter of 2012. Even Apple has issued a warning to its investors.

"Lenovo is still assessing the full impact, but does anticipate some constraints on the availability of hard disk drives (HDDs) as a result of the flooding in Thailand," said a Lenovo statement emailed to journalists.

However, whether the supply tightening will lead to noticeable price rises in drives, or the products containing them, is difficult to call. Vendors have so far shied away from making such predictions.

All of the major vendors already have production centers elsewhere, particularly in number one hard drive centre China, and can compensate as long as the effects of the flooding don't persist for more than a few weeks.

With recession stalking many consuming countries, and the market under unusual pressure from computers that use solid-state memory instead, it's not clear that vendors can increase prices significantly without sales consequences.

Similar predictions of shortages and price rises were made after the more serious Japan earthquake and tsunami earlier this year. Laptop batteries and parts for the Apple iPad were said to be under threat but prices of end products stayed the same as vendors absorbed the price increases that occurred.

That can cause problems for companies in specific sectors such as UK set-top box maker Pace Micro, which depends on hard drive shipments and has seen its share price drop significantly after the Thailand floods. Sony, too, has faced disruption in production of some digital cameras, a sector more concentrated on Thailand.

So far, in the UK at least, pessimism has been confined to third party storage suppliers.

"With this bleak outlook on the global storage market, we envisage significant price increases in the coming months but, Origin will do everything possible to continue supply of our solutions at a fair market price," said Origin Storage managing director, Andy Cordial, without being drawn on what those might be.

The floods struck this month after months of well above normal monsoon rains. The death total has reached at least 350 people in and around the capital city, Bangkok.

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