The weekend was tense in Thailand as floodwaters from the north, mixed with continued monsoon rains, met high tides from the south creeping inland. Bangkok itself seems to have been spared thanks to various precautionary measures taken. Upriver the same cannot be said as more people have lost their lives to drowning, now over 300 known dead with the likelihood of that number rising, and over 2.3 million people directly affected by the worst flooding in 50 years (see this report from Associated Press from personal fly-over accounts).
While Bangkok is breathing a first sigh of relief for itself, this is only the interim sigh until the next high tide at the end of the month, when mounting flooded rivers will combine with the higher sea levels. The rains have yet to stop and the toll is mounting, not just in lives, but in economic impact for this emerging economy (see this Bloomberg article for the latest updates on the situation).
There is still a lag in the amount of concrete information we are able to gather regarding the precise extent of damage, destruction, level of water and disruption duration for specific companies as well as a general (and valid) assessment of the impact of this terrible flooding situation on the semiconductor and electronics supply chain. The reasons for these lags and gaps is that the evacuation order for the industrial parks and surrounding areas is still in force because the situation has yet to stabilize (see this report from Reuters; here from Bangkok Post; here from Bernama, Malaysian news; here from Associated Press; and here from Wall Street Journal).
What we do know is that companies such as Toyota and Honda remain shuttered. In the case of Honda, vehicles are submerged and plants have been flooded; in the case of Toyota, the major issues thus far are supply chain and logistics problems. Both of these major automotive companies will remain shuttered until or through 10/21/11 and we expect to have damage and delay updates by next week (see this report on Japanese companies affected by Thailand's floods from Reuters).
In the case of the semiconductor manufacturers and OEMs, we can confirm that the surrounding areas to all of the major high tech parks are flooded with anywhere from 3-10 feet of water (1 to 2+ meters) based on various news wire and international media reports. Western Digital confirmed reports that these flood breaches in the local communities have penetrated the industrial parks and that they have submerged equipment and water penetration into their buildings at Bang Pa-in Industrial Park and at Navanakorn Industrial Park. Western Digital, like many others, will provide an initial update of their situation on Wednesday, 10/19/11.
Seagate's facilities are not located in the same areas as the flooded industrial parks as Western Digital and many others. Seagate's facilities are located in Teparuk and Korat (see this ElectronicsFeed update), and are not reported to have sustained damage at this time. However, the problem for Seagate is the massive logistical problems facing goods transportation and in receiving and distributing along the supply chain in Thailand. We expect to also receive updated information from Seagate later this week.
Because Thailand's flooding situation is still developing and no one knows if it will mount or begin to recede, it is expected that much of the current production by multi-national semiconductor, electronics and automotive companies will be moved to their other facilities in the region. The problem is not just waiting for the end of the present flooding situation, there is the follow-on processes of removal/draining of the flood waters, estimates of roughly one month minimum for buildings to dry out, then the time to re-equip, rebuild and to come back on-line.
Gartner has provided an initial estimate of the situation here, underscoring that "The situation in Ayutthaya is in flux, with flood waters three-meters deep in many surrounding areas. The highest rising water risk period is predicted to hit between 16 and 18 October, 2011."
Of greatest interest to the semiconductor and electronics supply chain are likely the following assessments provided by the Gartner report:
"From a semiconductor factory perspective, the back end (packaging/test) areas of the supply chain will be most affected by the flooding. There are 25 assembly facilities representing integrated device manufacturers (IDMs) and semiconductor assembly and test services (SATS) companies in the affected areas, including:
· ON — The former Sanyo facility near Rojana has suspended semiconductor packaging and test operations, representing roughly 5%-10% of ON's total product sales.
· Microchip — The company’s Cha-cherng-sao (50 miles east of Bangkok) location accounts for over 60% of its assembly and test capacity.
· NXP, Lapis Semiconductor (formerly Rohm’s OKI’s subsidiary), Sony, Spansion, Toshiba and Maxim Integrated Products — All noted companies have back-end packaging or test facilities in the greater Bangkok area; some have suspended operations.
· Other SATS companies affected include Hana Semiconductor, Stars Microelectronics, Circuit Electronic Industries (CEI), STATSChipPAC, and United Test and Assembly Center (UTAC)
"From an outsourced packaging/test capacity perspective, the flooding may not have a significant impact on semiconductor device manufacturing. Only two of the top 10 SATS packaging companies (STATSChipPAC and UTAC) have factories in Thailand, none of which are the primary locations. Most of what is packaged in Thailand is lower lead-count, lower-function parts: analog, electrically erasable programmable read-only memory (EEPROM) and supporting lower-end digital products. Most advanced logic and DRAM/Flash memory parts are packaged in Taiwan, Singapore, Korea or Japan."
At Smith, we are committed to bringing you the best information available to keep you apprised of the events that impact the semiconductor and electronics supply chain. We will continue to provide updates as more information becomes available.