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Friday, December 02, 2011
 Western Digital Resumes Hard Drive Production in Thailand
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Message Text: Western Digital (WD) said on Friday it has partly resumed production this week after months of suspension and warned of tighter global supply until early next year.

WD, the worst hit hard drive manufacturer by Thai floods, indicated it re-started production of hard drives this week in one of its buildings in Bang Pa-in (BPI), Thailand, one week ahead of internal schedules. This facility had been submerged in some six feet of water since October 15, the estate was pumped dry on November 17, main power was restored on November 26 and production restarted November 30.

"The passion, perseverance, ingenuity and execution exhibited by the WD team has been extraordinary and enabled us to make substantial progress in partially restoring our operations in Thailand, well in advance of our earliest expectations when the floods hit," said John Coyne, president and chief executive officer of WD. "Much work remains to be done but we couldn't be more pleased with the effort and results thus far, including tremendous support from our supply partners and strategic customers."

WD added that it had removed all submerged slider manufacturing equipment from the BPI facilities for assessment, decontamination and refurbishment and has commenced decontamination and restoration of its remaining buildings in BPI

The company expected to recommence head slider production in BPI in the March 2012 quarter (Q3 FY'12) and also begin production in a new WD slider fab location in Penang, Malaysia, in the same time frame.

Despite the recovery efforts, the company's other Thailand hard drive facilities at Navanakorn remain under approximately two feet of water. The industrial estate is expected to be pumped dry within ten days at which point the work of decontamination and refurbishment will commence.

WD believes that hard drive industry shipments in the December quarter will be limited to approximately 120 million units due to production and supply constraints related to the flooding in Thailand. This includes units that were in inventory at the beginning of the quarter.

"The company believes that demand for the December quarter is in the range of 170 million to 180 million units. Significant industry supply constraints will continue in the March quarter and beyond," Western Digital said in a statement.

Western Digital forecast on Friday $1.8 billion in October-December quarter revenue. Gross margin is also seen above the high end of its previous range of 18 percent to 23 percent, it said.

Thailand produces around half of global hard drives by housing Western Digital, Seagate, Toshiba Corp and Hitachi Global Storage Technologies.

Seagate said earlier this week that revenue for the current quarter would come in at $2.8 billion, better than market expectations, as its own shipment is seen falling by 16 percent from the previous quarter to 43 million units.

Toshiba is uncertain when it can resume production from its flood-hit plant, as it continues to clean up.

Research firm research firm IHS iSuppli said that floods would shrink global hard drive supply by 30 percent in the current quarter, and hit sales of PCs and semiconductors, affecting core businesses of Samsung, and HP.

IDC also described the damage to the industry as significant and added that PC shipments mignt be crimped by as much as a fifth in the first three months of 2012.

Regarding the planned acquisition of Hitachi Global Storage Technologies by Western Digital, the company is working to satisfy the remedy provision included in the European Commission's recent conditional approval of the transaction and to obtain approvals from the remaining regulatory authorities. Subject to completing these actions, the company is expecting to close the transaction by March 2012.
 
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