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By | Paul Kunert 9th November 2011 09:44

Deadly drive drought derails Dell's PC biz

Build-to-order operation sunk by Thai floods

Dell's build-to-order business model makes it the most vulnerable to the drive shortages that are wreaking havoc across the industry, channel analyst Context reckons.

The chaos resulting from the killer flooding in Thailand has sent the disk drive supply chain into turmoil, making PC shortages inevitable. So far Asus, as well as Acer, Samsung and Sony, have confirmed they expect some shortfall in supply during the run up to Christmas.

Channel analyst Context expects "all vendors to be affected with Dell to be most impacted", although the beancounter did not quantify the extent of the shortages.

"Dell's 'just in time' modus operandi means the vendor tends to hold low levels of inventory due to computers' high rate of depreciation. Whilst this has been enormously successful in the past the impending shortages will have an adverse effect on them," it added.

Consumer lines rather than commercial products are expected to be directly in the firing line to reflect the lower margins that vendor make on retail kit, the analyst said.

Dell did not give a straight answer to any potential supply constraint, simply confirming that it was "continuing to actively monitor" the market and anticipating drive shortages.

"We are working aggressively with our HDD suppliers to mitigate any customer impact. We have teams engaging daily with affected suppliers regarding this industry situation to most effectively and efficiently manage our HDD supply chain," it claimed in a statement.

Rival US firm HP isn't doing much to clarify the outlook either. Responding to questions about shortages, it added: "We are in constant communication with our employees, customers and partners to optimise business continuity in this dynamic situation."

Distribution sources told El Reg there could be 20 per cent to 30 per cent shortfall in PC supply across the UK in December, a pretty cataclysmic prediction. But ODMs in the Far East are expecting closer to a 10 per cent supply constraint worldwide.

In other drive-related news, Context saw reseller HDD unit sell-through shoot up 109 per cent in the week commencing 17 October – five days after the flooding in Thailand – with WD, Seagate and Buffalo shipments up 118 per cent, 175 per cent and 200 per cent respectively.

However, the supply chain did not react as quickly to the looming threat of shortages with unit prices remaining stable, "emphasising distributors' sluggishness in raising price to react to the shortage", said Context.

As revealed by El Reg, however, in the past fortnight drive prices have doubled and are expected to rise again with WD suspending production for six months and rival Seagate hit by some sub-assembly issues. ®

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