This holiday season might be a big one for SSD manufacturers. Like most tropical regions, Thailand experiences dry and rainy seasons, which are somewhat predicable, with the rainy season beginning in March or April and ending by October. Flooding is not uncommon, and so the most flood prone, and economically important areas, such as those where Western Digital, Seagate and their componenent suppliers set-up shop, often end up being the most well protected. Unfortunately this year's flooding wouldn't abide the measures taken against it, and so the levies, dams and pumps failed to protect the factories that are the lifeblood of the Thai economy. The loss of industry will have a global impact, but it's the loss of life, home and livelihood that will have a much longer impact on the Thailand's people than on our desire for magnetic storage. We'll leave the plight of the people to be covered by more capable journalists, but we'll do our best to lay out the impact on our beat.
Western Digital was one of the first to lay out the impact of the flooding on its operations. The initial flooding led to a temporary shutdown, a result of disruptions to transportation and utilities in the region. Five days after their first press release, WD announced that two of their facilities in and around Bangkok had been flooded and suffered damage. In addition, their local component suppliers had been disrupted, potentially causing disruptions at facilities outside of Thailand. Seagate told a similar story in their press releases. Both companies issued assurances that their employees were safe, but made clear their expected financial hardship. So what does this all mean?
WD and Seagate each have facilities and component suppliers outside of Thailand that will be working overtime to fulfill the needs of their customers. It's possible, but unlikely, that manufacturing capacity at the other facilities can be maximized and that the overall impact to the consumer will be minimal. What's more likely is that production will be optimized towards fulfilling contract obligations and satisfying their biggest customers. Here's the hard news: you are not their biggest customers. Dell, Apple, Lenovo and HP are the biggest customers in the hard drive market, so it's likely that nearly every drive that rolls off the line will end up in their PC's and notebooks. No PC manufacturer wants to raise prices, especially as they approach the holiday season, so if you're in the market for a new laptop, don't worry, you'll be fine. If you were planning on building your own desktop, or populating a network storage device, then expect to pay much more than just a month ago.
The reality is, though, that even those of us interested in building our own personal PC right now, or getting a new NAS are really a big enough market for this to be anything but a blip. See, just behind the PC OEMs in the magnetic storage market is the cloud. Enterprise customers have been implementing SSD solutions for increased throughput, but when handling massive amounts of data, massive amounts of storage is necessary, and for that magnetic storage is unlikely to be replaced anytime soon. New deployments will likely be delayed or downsized, in only the rarest of cases is delay a worse debt than increased cost. Essential deployments will make do with the increased costs; few if any companies will resort to even consumer grade SSDs, the cost per gigabyte remains far higher than even the elevated prices we're seeing in the HDD market. Where enterprises will be squeezed is in replacing failed hard drives. In mission critical deployments hard drives are constantly tested and when they reach a certain wear level they are replaced, before failure could cause critical data loss. Some of these deployments may increase the amount of allowable wear on their drives, delaying replacements in the hopes that available supplies can get them past the shortage.
So then, unless you're a PC OEM or work for an enterprise solutions company, you're unlikely to see any large impact from the work stoppages in Thailand. Certainly anyone replacing a hard drive, or building something new will have to take this new pricing into account. We can fully expect the October to December quarter to show significant drops in retail sales for WD and Seagate. Some users might look to SSDs, but the bump in sales will be primarily in the smaller boot drives; larger drives that can be used for file storage will remain prohibitively expensive. That won't stop SSD manufacturer's from offering steep price discounts across their lines, and e-tailers and retailers alike will be baiting the hook with further discounts around Black Friday, and throughout the rest of the holiday season. The shortage is expected to persist till at least January of 2012, so anyone holding off an HDD purchase, enthusiast, PC OEM, enterprise manager or otherwise, needn't wait too much longer.