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Monday
Dec052011

The Flood in Thailand is Expected to Raise Prices

DateMonday, December 5, 2011 at 9:33AM

The worst monsoon flood in five decades hit Thailand this July, where the rainfall was 344% above the average. The rain caused rivers to flood and dams to reach over-capacity, leaving ten feet of water in some places. Despite efforts to pump the water out, it is not expected to recede for at least another forty days. This devastating flood is not only heart-wrenching for the Thai people, but it will severely affect the production of hard drives, a major component in all computers.  

Expert John Monroe at Gartner Technology Research Firm estimates that it will take a full year for hard-drive production to return to a normal output. Not surprising, considering the flooding happened in July and the waters are still six feet high in some factories. Since Thailand is the world’s second-largest producer of hard-drives, there will be a significant scarcity that will impact all manufacturing companies. Many companies like Lenovo, Cisco Systems, Dell, and NetApp, have made statements assuring people that they will monitor the situation and address the problem as best they can. People are advised to order and purchase whatever they need immediately, as companies have enough supply to meet the current demand. But, the factories will not be running in time to prepare for future orders.

The impending shortage is already manifesting itself in prices. A hard- drive costing our customers $260 is now going to cost $520, due to low supply. Some analysts believe the price could double yet again. This increase will manifest itself in two other places: computer repair and data backup.  A hard-drive stores data, and unfortunately is the #1 most likely component to fail in computers. All computer repairs that require replacing a hard-drive will increase in price. Sadly, any online data backup uses a hard-drive as well; some companies may charge more to hedge the possibility of replacement.

No one knows what the impact will be on the companies and consumers in the near future until the factories are back to normal production. The flood happened in July and water levels are still six feet high.  Pumping the water out, fixing the damage, and getting new equipment is predicted to take about a year. Hard-drives will be in high demand without adequate production for some time creating an entire industry crunch.

 

 

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