Business

Monday November 7, 2011

Hard disk drive manufacturers expect Thai floods to affect production

By DAVID TAN
davidtan@thestar.com.my


GEORGE TOWN: Manufacturers of hard disk drive (HDD) components will not be able to hit the targeted annual output for 2011 due to the floods in Thailand.

Penang-based HDD component manufacturers Eng Teknologi Holdings Bhd and Dufu Technology Corp Bhd have revised their production figure for 2011 as a result of the floods.

Eng Teknologi expects to produce 140 million pieces of HDD components comprising base plates, separators, and actuators this year, about 10% less than the 150 million pieces produced for 2010.

Dufu Technology is forecasting its production of HDD components comprising spacers and clamps to hit 145 million pieces for 2011, 25% less than its earlier projection of 180 million pieces.

Teh: ‘We are incurring high operation costs as we are still paying wages to the group’s 4,600 workers.’

Eng Teknologi chief executive officer Datuk Y.K. Teh told StarBiz that if not for the floods in Thailand, the group would have achieved its target of 200 million HDD components this year.

“Neither our plant nor that of our customers are able to execute production due to the flooding,” he said.

To date, Eng Teknologi has invested RM150mil in its Thai facility, which generates about 40% of the group's revenue.

Teh said the group would have to wait until the flood water receded before deciding on how much to reinvest in its operations in Thailand.

“At the moment we are incurring high operation costs as we are still paying wages to the group's 4,600 workers located in Dongguan, China, the Philippines, Thailand, and Malaysia,” he said.

Due to the rising demand for HDD, the group had recently allocated RM50mil to expand production capacity of its plants in the Philippines and Johor Baru, Teh added.

Thai residents wading through floodwaters in the Bang Phlat district, Bangkok yesterday. Floodwaters continue to rise and swamp the central part of the capital forcing shopping centers and more business to close. — EPA

“The prices of HDD and components are expected to increase once there is full recovery, which is expected to take place in the second quarter of 2012, due to the demand to replenish inventory.

“But the response time from the supply of hard disk drives and HDD components would be slow, as manufacturers of both products would also be reinvesting to resume production and to increase capacity, resulting in a shortage situation for both products.

“A price hike for hard disk drives and components is therefore expected,” he said.

Teh added that the retail price of hard disk drives in the region had gone up by 10% to 40%, depending on the size and quality, since the hard disk drive production in Thailand was disrupted by the floods.

Dufu CEO P.Y. Yong said that for the fourth quarter 2011, the group expected its orders for HDD components to decline by about 50% as the major HDD producers in Thailand are unable to manufacture.

“There should be recovery at the end of the first quarter 2012.

“There will be a time lag between demand and supply, causing HDD prices to hike for the short term,” he said.

Yong said the group aimed to reduce the contribution of its HDD business to less than 70% next year, compared to 70% presently.

“We will increase the contribution of our other businesses such as medical implants, sensor and control systems, and computer peripherals,” he said.

Yong said that while the growth of the HDD industry was positive next year, the HDD market had more or less reached maturity.

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