| SAN FRANCISCO
SAN FRANCISCO A looming shortage of hard drives caused by floods in Thailand threatens to disrupt computer manufacturers as soon as December and hurt tech giants like Intel (INTC.O), Apple (AAPL.O) and Dell DELL.O.
Thailand is the No. 2 maker of hard drives, used in laptops, servers and TV set-top boxes, and damage caused by flooding across the region could keep factories closed or hobbled for months, analysts and executives say.
World output of hard drives could fall as much as 30 percent in the final three months of 2011 and manufacturers that need them are now scrambling to snap up existing inventories, according to market research firm IHS iSuppli.
Leading chipmaker Intel said on Friday it was keeping an eye on a "dynamic" situation but expects existing stores of drives and unaffected sources to help keep the PC industry supplied. If manufacturers build fewer PCs, Intel sells fewer processors.
"The PC supply chain has proven to be very resilient, as most recently demonstrated in the response to the earthquake in Japan," Intel spokesman Jon Carvill said.
Top hard drive makers Western Digital WDC.N and Seagate (STX.O) both have factories in Thailand, where flooding has killed at least 320 people since July and devastated industrialized areas in the center of the country.
Western Digital's factories are closed and Seagate, while its plants are running, warns it could face parts shortages.
Apple chief executive Steve Cook this week told analysts on a conference call he expects an industry shortage of disk drives.
PC PRODUCTION MAY BE IN JEOPARDY
Intel on Tuesday said the flooding would not affect the PC market in the fourth quarter.
Since then, details about the damage to Western Digital's factories in Thailand have caused some analysts to believe a shortage of hard drives could start interfering with PC production in December.
"There's a major disconnect here. We don't see how they can not be affected and we're recommending investors avoid Intel at these levels," said Brad Gastwirth, co-founder of ABR Investment Strategy, an independent research firm.
Western Digital said Thailand accounts for 60 percent of drive production. Its customers have about two weeks of inventory on hand and distributors have around four weeks of supplies.
As those inventories get used up, the supply of hard drives may be about 10 percent less than demand for the December quarter, estimated Rodman & Renshaw analyst Ashok Kumar.
With production in Thailand likely to be constrained for several weeks, customers will face larger shortages in early 2012, IHS iSuppli analyst Fang Zhang said.
No. 2 PC maker Dell said the flood would have little impact on its quarter ending this month but did not say how it expected to be impacted beyond then.
A Hewlett-Packard (HPQ.N) spokesman declined to comment.
(Reporting by Noel Randewich, additional reporting by Supantha Mukherjee in New York; Editing by Bob Burgdorfer)