In light of the massive damage months-long flooding in Thailand brought upon the HDD industry - submerged factories, constrained supply lines and inflated product prices - there are some important lessons it can learn from how NAND flash memory makers reacted to the Japanese earthquake earlier this year, revealed market research company IHS.
HDD manufacturers should spread out their inventory and increase supply chain redundancies, recommended Dee Nguyen, IHS memory analyst. The industry's centralized production ("A quarter of the worldwide HDD capacity is located in Thailand") may have looked good on paper, but is now hampering recovery efforts, she added.
According to the analyst, Japan's NAND flash memory industry bounced back from the devastating earthquake early this year, posting a nearly 10 percent revenue increase after falling 4.3 percent, thanks in large part to a malleable supply line - something the HDD sector sadly lacks.
"A key takeaway for HDD suppliers now enduring the crisis in Thailand is to study the painful lessons from the Japan disaster, especially on how to be flexible with production capacity," said Nguyen. "NAND manufacturers were nimble in response following the quake, stepping in to increase production after the disaster hit one of their own. In the larger high-tech space, the catastrophe also started a conversation among companies about the vulnerabilities of the supply chain and their capability to manage unexpected events - allowing the overall industry to take a step toward disaster preparedness in the future."
To make matters worse, Nguyen explained that there were no HDD manufacturer that could pick up the slack for the affected companies - a luxury the Japanese NAND sector could fell back on to recover quickly. Indeed, only a handful of major HDD makers remain after key acquisitions by market heavyweights Western Digital and Seagate.
Nguyen admitted that Thailand's flooding and Japan's earthquake aren't exactly equals in regard to how they affected their respective country's production lines. Thailand's catastrophe means companies must wait for waters to subside before recovery can begin in earnest, she said - something Japanese NAND factories didn't experience.
Both Western Digital and Seagate have revised their shipment forecasts for the final 2011 quarter, predicting the disaster's impact will be felt well into 2012.
