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www.us- tech.com


December, 2011 TEcH-Op-Ed


SOUNDING OFF


By Walter Salm Editor


Hard Drives to Become Scarce T


his has been a year of horrendous natural disasters — particularly in the Pacific Rim areas. The enormous earthquake and tsunami that demol- ished critical areas of Japan has been well documented. We still see


frightening TV news stories about the demolished nuclear power plant. One result of this has been a revisiting of safety considerations at nuclear power plants all over the world, and especially in the U.S. where existing nuclear plants are becoming senior citizens. The October monsoon floods wiped out a major portion of the world’s


hard disk drive production in Thailand. This happened because of the concen- trated clustering of similar industries that inevitably occurs because of economies of scale and logistics. Before the monsoons, Thailand was the source for 45 percent of the world’s HDD production. Major among the compa- nies affected there was world leader Western Digital, whose 37,000 employees have been put out of work until WD’s two major plants can be reconstituted. Costly production machinery has been lost to the floods; some of it will be re- conditioned and recommissioned, while other capital equipment will have to be replaced. In addition, many parts sources that make up the infrastructure have been displaced or shut down. WD has lost 60 percent of its total produc- tion with the Thailand monsoons. While the balance of its HDD production, located in Malaysia, has not been affected, the company is trying to squeeze some additional production from those plants. This is not something that will be fixed next week; it’s going to have a


long-lasting effect on the market and is already causing increased prices not only on HDDs, but on computers as well. Rebuilding and reconstituting the lost HDD capacity will be a matter of many months if not a year or more. and even then, it will be quite awhile for the market prices to start finding their pre-flood level. It’s certainly a good time to postpone upgrading a hard disk drive, pro-


vided you have a sufficiently robust backup system in place. If you already have enough HDD storage available to meet your immediate needs, you’re lucky. Still, it’s hard to judge prices, since as we went to press, you could still go online and buy a Seagate 2TB external HDD for $99. There were other, similarly low special sale prices at my personal favorite site for such purchas- es: newegg.com. One of the industry’s old horror stories still remains in the wings to


haunt those of us old enough to remember. Back about three decades ago, there were severe shortages of the most popular, new and highly complex ICs. Many of these were on allocation and wait times were typically six to 12 months — an unconscionable length of time if you wanted to get a product in- to production. OEMs typically would order these products from several sources — distributors as well as the IC fabs — at the same time, hoping that at least one of them would deliver early enough to help speed the new prod- uct’s time to market. The result: Distributor “A” would deliver in four months, and the cus-


tomer would cancel the other orders, maybe not as expeditiously as the situa- tion called for. Suddenly, the product was available in huge surplus quantities from Distributor “B”, “C” and “D” with a truckload of the stuff coming down the pike from the fab itself a few months after. This huge surplus suddenly de- pressed the price for the commodity and the once shortage-driven market was suddenly swimming in overstock product, resulting in a nasty downturn in the IC market. There were several pendulum swings like this, causing sever- al manufacturers to either close their doors or move their operations overseas. Can this situation happen with the current shortage of HDDs? Possibly, but this shortage is caused by a natural disaster, and it’s going to take quite a while for these producers to get back to where they were a year ago. In any event, December is a tough time to gauge market trends for con-


sumer electronics. Everybody has got stuff on sale; you can even buy data stor- age at your local drug store. After the Holiday rush settles, and the post-holi- day sales are finished, new market prices will probably re-establish them- selves. That’s when the fallout and the shortages will begin. r


PUBLISHER’S NOTE


By Jacob Fattal Publisher


Have We Finally Turned the Corner?


T


he Autumn round of trade shows can get very hectic. It seems as though everyone’s Trade Show persona has been slumbering all Summer, and is suddenly let out of its cage. First there was Autotestcon in mid-August.


Then the twin shows in Chicagoland: AATE and IPC Midwest, followed by South-TEC, IMAPS, SMTAI, and finally productronica in Germany. If all those others didn’t wear you down, the Munich show will, it’s that huge. Productronica is definitely a show where renting electric scooters might


well be the answer. It was busy and crowded, even though it was in seven sep- arate halls. While they were connected by enclosed walkways, these were usu- ally the long way around. The short way between those separate halls was to go outdoors, and Munich in November can be quite cold. But the 38,500 visi- tors didn’t seem to mind. After all, this show is only presented every other year. It gathered together some 1,234 exhibitors from 39 countries and cov- ered more than 800,000 square feet of exhibit space. Somewhere in the midst of all that was the U.S. Tech booth, stacked up with copies of our print edition. According to show management, participation had increased significant-


ly over the 2009 show — recovering to the 2007 level. This could mean that the electronics industry has recovered and is on the way to setting new world records. Unfortunately, there are several stumbling blocks in the way, not the


least of which is the struggle to right the financial ships of Greece and Italy. The European Union as well as the U.K. and the U.S. have all pledged sup- port to prop up the Euro during this crisis, and in the face of this support, stock markets worldwide have rebounded strongly. Earlier this year, we had to deal with the effects of the devastating earthquake and tsunami in Japan, followed by the October monsoons in Southeast Asia — all having a negative effect on the supply chains and global productivity. The hoped-for rush to buy Holiday gifts in the U.S. has far exceeded


hopes and expectations. The American economy after all, is really based on consumer confidence and spending, and as we close out this year, it looks as though we are definitely on the rebound. Let’s just hope we don’t get slapped with another natural disaster or another failing national economy somewhere in the world. We are all interconnected today; if someone belches in Athens, we certainly hear it in Philadelphia. r


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