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www.us- tech.com


December, 2011


Thailand Floods / HDD Shortage Continued from page 1


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cember 2011 and throughout 2012. In addition, replacing and repairing capital equipment in the flooded plants will lead to large increases in capital equipment spending through 2012 that will likely approach $1 bil- lion.


Although demand for HDDs in


the December 2011 calendar quarter was estimated as high as 180 million units, actual production estimates are for 110-120 million HDDs. The difference of 50-60 M units between production capacity and demand has led to price spikes for HDDs in the 20-50 percent range for the short term. With production volumes in the March calendar quarter of 2012 constrained to 120-130 M units with demand (including pent up demand from the prior quarter) being much higher, long-term price increases for HDDs in the range of 25 percent over pre-flood levels appear likely for the near future. Overall drive average selling prices (ASPs) in the $62 to $65 range are quite likely for CQ4 2011 and CQ1 2012. In addition to these price in-


creases, the market share leadership for HDDs is likely to shift to Seagate from Western Digital in the short term until WD can shift production to other Asian countries or get new Thailand facilities operational. The impact of the floods on


WD’s temporary leadership could pave the way for easier approval of the merger between WD and Hitachi GST (Hitachi’s HDD operation) which has been delayed by European regulatory agencies. Toshiba an- nounced that it will restart some Thai output early in 2012 but WD has not yet made a public statement on when it can start operations in Thailand or nearby countries to re- place lost Thai output. Some companies were able to


save their equipment from inunda- tion and thus will be back in opera- tion sooner than others. Magnecomp (part of TDK), a manufacturer of sus- pensions for hard disk drive heads, announced that it would get its pro-


duction started in one of its Thailand plants on November 7, 2011. Al- though the company had to cease op- eration on October 8 to 12, employees were able to move 95 percent of pro- duction equipment from the first floor of one of its facilities prior to the inundation by floodwaters. As a con- sequence of this heroic effort, MPT will be back in operation before many other facilities, aiding TDK’s efforts to supply heads to the HDD industry and replace some shortfalls due to slider fabrication and head assembly facilities lost by companies such as Western Digital. Equipment long immersed in


water will need extensive repairs at least and likely most of this equip- ment will need to be replaced. The kinds of equipment needed range from several hundred CNC ma- chines, through specialized fixtures and equipment for the production of sliders, to back-end drive test equip- ment and other specialized produc- tion, metrology and production meas- urement equipment. If, as we expect, much of this equipment must be re- placed, the total capital equipment costs from the Thailand flood could approach $1 B. Combined with at- tempts to increase production to meet increasing demand for HDDs, 2012 will likely be a very good year for some providers of HDD and HDD component capital equipment includ- ing Teradyne, Veeco and Xyratex. The 2012 Hard Disk Drive


Technology and Capital Report from Coughlin Associates (due out at the end of November 2011, www.tom- coughlin.com/techpapers.htm) will look at the capital costs associated with repair and replacement of dam- aged equipment from the Thailand flood and give estimates for how long it will take to get these plants opera- tional. Contact: Thomas Coughlin,


Coughlin Associates, % 408-978- 8184 E-mail: tom@tomcoughlin.com Web: www.tomcoughlin.com r


cOnTEnTS


Tech-Op-Ed ........................... 4 Tech Watch............................. 10 People.................................... 12 Business News........................ 14 Business Briefs....................... 15 Management........................ 16 EMS .................................... 18 Electronic Mfg. Prods...... 22 Production.......................... 54 Partnering........................... 56 Distribution........................ 58 New Products..................... 70 High-Tech Events............. 80 Editorial Calendar............... 80 Advertisers Index............... 82


Special Focus: Test and Measurement........... 60


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