At least two of the country’s leading computer suppliers are predicting short to medium-term delivery delays and possible price hikes in personal computers and components in the wake of the devastating floods in Thailand, the world’s second largest producer – behind China – of computer hard drives.
Local supplier NT Computeac told Stabroek Business earlier this week that the immediate effect of the closure of key computer component manufacturers in Bangkok and other parts of Thailand will be the late delivery of imports destined for Guyana. The official said the company was awaiting overdue supplies. He said that while it was anticipated that the shortage of supplies would affect prices it was difficult to speculate on the extent to which prices would be affected.
General Manager of Starr Computers, Rehman Majeed, told Stabroek Business that given the extent of the disruption in production resulting from the floods in Thailand it was “inevitable” that prices would increase at least for some months. He explained that the nature of the production process in such a hi-tech industry would inevitably mean that it would take some time, first, to re-assemble the factories which have had to be abandoned in some cases then to get production going again.
Starr Computers is the largest assembler of computers locally and Majeed said the supply of hard drives, a critical component in the assembly process was likely to become a greater challenge, the longer the shortage persists.
According to Majeed, the tragedy in Thailand and its effects on global computer production could hardly have come at a more inopportune time given the seasonal demand for computers as gifts. He said while the company had a sufficiently adequate supply of hard drives to continue its assembly process in the immediate term, expected delays in the delivery orders were likely to affect both the availability and price of computers.
While existing inventory in the global supply chain is expected to satisfy demand until early December, at the latest, computer and component supplies could dwindle significantly in the period immediately preceding Christmas since plants in China and Malaysia, two of the other major players in the sector will not be sufficient to satisfy demand.
Some of the more popular brands of PCs imported into Guyana have been seriously affected by the floods in Thailand. The Chinese company Lenovo, the world’s second largest PC maker, said constraints on the supply of hard drives could affect production through the first quarter of next year. Samsung, another brand popular with local users, has said it expects the floods in Thailand to affect prices of PCs since the prices of memory chips are likely to increase. Samsung is the world’s leading supplier of memory chips. Prices for the Taiwanese Acer brand of computers have already been hiked to cope with what the company says has been increasing costs in the wake of the floods in Thailand and the resulting shortage in the supply of key components.
Majeed told Stabroek Business that the component supply difficulties that have arisen in the wake of the floods in Thailand have been complicated by tight links forged by global companies in their supply chains in order minimize the holding of costly inventory. He said the crisis was probably likely to affect laptop computers to a lesser extent since the industry practice has been to hold larger stocks of laptop components, including memory components, than PC components.
Meanwhile, speaking with Stabroek Business from his office in the United States, Starr Computers Chief Executive Officer Mike Mohan said the impact of the floods in Thailand is likely to be more severe and more protracted in the IT sectors in developing countries, including Guyana. He said that apart from the fact that hard drive costs have more than doubled in the United States over the past two weeks, some US distributors have actually placed a freeze on the sale of hard drives. Mohan said regularizing the production and global supply of hard drives and other computer components could extend way beyond the projected March 2012 period. “The extent of the damage to factories in Thailand and the dismantling has been so considerable that it will take immense capital investment and time to rebuild infrastructure and to replace the damaged operating assets of manufacturing plants in Thailand. That has to happen before production can be restarted,” Mohan said. According to him, the component supply problems are likely to continue for countries like Guyana for an even longer period since “once production is restarted distribution will be focused on a ‘food chain’ order of priority with first tier customers like Hewlett Packard, Dell, Acer, Lenovo and Samsung enjoying first preference. Most IT businesses in countries like Guyana access their components from sub-distributors which means that they will have to until the needs of the big players are met,” Mohan said.
According to the Guyanese-born computer engineer, the current hard drive shortage could impact on the production of desktops, notebooks and netbooks as well as other IT-related equipment including servers and surveillance equipment. “Starr Computers is making every effort to have an adequate supply of hard drives to meet the production of its X-Finity and Q-See DVR’s in Guyana though we are concerned as well over the likely impact of the current situation on the wider local IT sector including computer outlets and service centers. Frankly, shortages are inevitable.”
Shortly after arriving in Guyana last Wednesday Mohan subsequently told this newspaper that more worrying news was beginning to emerge from the global IT industry in the wake of the floods in Thailand. He said that over the past two weeks global distributors had moved to capitalize on already dwindling supplies of hard drives by pushing prices up more than 200 per cent while DVR prices had already gone up by 10 per cent. According to Mohan Hewlett Packard and other major players in the sector had already given notice on imminent price hikes.
Noting the his focus on the looming component availability crisis in the IT sector Mohan said that he felt sufficiently concerned to help the rest of the sector understand the nature and scale of the problem. “Starr will continue to subsidize the cost of the hard drives to its customers for as long as we can in order to help keep the local IT industry stable. We will, however, be limiting the quantities that we sell to individual customers until the shortage subsides since we also have to hold drives in stock to meet our own production requirements.
Thailand has become on the world’s major manufacturing centres for computer components in view of generous government incentives, tax-breaks and land-acquisition deals designed to attract investors in hi-tech industries.
Thailand’s top hard-drive manufacturer, Western Digital has already closed its operations in Thailand in the wake of the flooding and another major company, Seagate has said it could face parts’ shortages.
