Thailand Flood Impact on HDD Market

What we know so far:

• Worst flooding in 50 years
    • More than two-thirds of the country is flooded
    • 14,000 factories have been affected
    • Over 900,000 families impacted and hundreds of lives have been tragically lost
    • Infrastructure impact is still being assesed (timing unknown)
    • Unknown timing of when the high-water mark occur
    • Roughly 2 meters of standing water outside and 1 meter inside factories

• Hard Drive Related
    • All capacities and interfaces are affected as well as downstream supply partners
    • Q4’11 volumes will be short approximately 25-30%
    • Q1’12 could be worse as inventory dries up
    • This is happening in conjuction with industry consolidation (WD/Hitachi & Seagate/Samsung)
    • This is an ongoing and volatile situation

	The picture on the right is from October.  As of Today (11/14) the water has not crested.

Factory Locations Compared to the Floods:

Western Digital (~33% Market Share) •Market leader •Press release stated revenue (~$1B) and units(26M) will be cut 50-60% for Q4’11 •Drive and component factory affected Seagate (~29% Market Share) •Drive factories unaffected at this time •Component shortage •5-10M unit shortage in Q4’11 Hitachi (~17% Market Share) •Drive factories unaffected at this time •Component shortage Toshiba (~12% Market Share) •50% of drive manufacturing is in Thailand Samsung (~9% Market Share) •Drive factories unaffected at this time •Component shortage •Allocating supply to internal notebook group
	Note: 30-40% of Hard Drive component production is done in Thailand.  Media & Substrate •Western Digital •TDK •Furukawa Heads •Western Digital Motor •Nidec •Minebea Suspension •Hutchinson Technology •TDK’s Magnecomp

Industry Analysts Comments

IDC
•Significant shortage in Q4’11 and could be worse in Q1’12. May affect Q212
•Biggest issues are capital equipment and infrastructure
•Predict “Black Friday” deals will go on eBay at 2x the price
•Up to 70% price increases
•Priorities of allocation (in order) Enterprise, PC/Laptop, CE, Distribution, Retail
•9-12 month supply agreements based on share awards

Gartner
•The hard drive industry is permanently transformed
•Pre flood volumes will not come back until Q4’12
•We don’t know the extend of the damage
•Pricing will be affected
•Capital equipment lead times are up to 9 months.

iSuppli
•Many industries affected, but HDD hit the hardest
•Too early to grasp overall impact and project recovery schedule until water level recedes.
•Worst case scenario multiple quarter recovery
•Worst decline in hard drive industry since Q4’08 (peak of the recession)