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UPDATE2 Thailand Flood Extends Reach: Assessments begin, disruptions certain

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The flooding situation in Thailand shows no signs of abating yet.  Rather, Bangkok is now also bracing for higher water level inundation as upriver run-off poses more problems in between high tides from the south (see this round-up of Thailand's newspapers by Reuters; this report today from WSJ; this, this, and this from Bangkok Post).

At this point we have more information on the flooding situation, the impact on various industrial parks, initial forecasts by some of the major semiconductor and automotive companies, and supply chain disruptions.

The Flooding

As stated in the opening, the flooding is still mounting in Thailand and there is no precise forecast as to when it may subside.  Estimates continue to have hope for the end of October, after the next high tide, though without cessation of the monsoon rains at the root of the flood, it is hard to say.  These are the worst floods in over 50 years to hit Thailand and roughly one-third of the country is underwater.  The dikes, sluice gates and sandbagged barriers are being penetrated and flash flooding from run-off from the rainforests is likely to worsen the situation.  The situation is grave and new evacuations have been issued along the rivers, in parts of Bangkok, and southern areas.

Industrial Parks

Firstly, it is important to note that a significant number of power plants have been taken off-line and for those plants that are still in operation, the power to affected areas has long been cut to avoid electrocution.  How long it will take to regain power, once the flooding situation has been contained (which it is far from being at this point), is yet another open question.

"The attempt by workers and authorities to save flooded Nava Nakorn Industrial Park in Pathum Thani has been called off because water on the Phahon Yothin highway continues to rise, reports said," according to this post from Bangkok Post. It is one of the most recent industrial parks to lose its battle against the floodwaters.

According to a press release from Toshiba here, as of 10/18, they stated that the Bangkadi Industrial Park, Pathumtani, was facing a problem due to a breach in the levee near it.  Toshiba will update the situation in the next day or two.  Given the Bangkok Post report though, it is likely that the situation for the Bangkadi Industrial Park is similar to the Navanakorn Industrial Estate Zone, also in Pathumtani.

The Rojana Industrial Park and the Hi-Tech Industrial Estate, Amphur Bang Pa-in, both in Ayuatthaya are believed to be inundated with roughly three meters (almost 10 feet) of water.  While no companies have been able to enter the park to assess damages because of a standing evacuation order and mounting water levels, we do anticipate significant if not severe damage to be found.  The flooding situation in Ayuatthaya is so dire that it is now creating greater problems for surrounding and downstream areas: "A huge amount of floodwater from neighbouring Ayutthaya and Pathum Thani provinces has been flowing into Nonthaburi since yesterday," according to this post from Bangkok Post.

Electronics Supply Chain

Among those with facilities in affected areas in Thailand are (see also this post and here in Forbes):

  • Hutchinson Technology
  • Western Digital (see their PR here)
  • Toshiba (see their PR here)
  • Seagate
  • Hitatchi GST
  • Sanyo (ON Semi division)
  • ON Semiconductor (see their PR here)
  • Microsemi
  • NXP Manufacturing
  • Hana Microelectronics PCL (see their PR here)
  • ROHM (see their PR here)
  • Nikon
  • Sony (see their PR here)
  • Nidec
  • Min Aik (HDD component manufacturer)
  • Minebea
  • Cal-Comp

Automotive companies are also being significantly impacted by the flooding, as many have regional hubs in Thailand (see this from Bangkok Post).  Among those severely affected by the flooding situation are:

  • Honda
  • Toyota
  • Nissan
  • Mitsubishi

There are many more companies linked to the semiconductor and electronics supply chains with facilities in Thailand that are affected by the current devastation, and it is nearly impossible to list them all.  Of concern also are those along the PCB and FPCB supply chain, according to a DigiTimes report today, 10/19/11, which cites a two- to three-month window until full production is restored.  Some of the Japanese companies that are affected and have been highlighted in news reports (such as this from Bloomberg) include:

  • KCE Electronics
  • Nippon Mektron
  • Fujikura
  • Kubota Corporation
  • Shin-Etsu Chemical

This situation will affect not only automotive components but is also expected to further impact the PC and general consumer electronics supply chains (see this commentary and forecast from DisplaySearch; this from Electronics News; this from WSJ; this from Reuters; this from Gartner; and this from iSuppli).

Summary

At this point the situation continues to develop and worsen.  The best case scenario for resumption of production is roughly one- to two-months for the less severely impacted companies.  However, until the floodwaters recede, there is no starting point for the restoration of production nor business of any type.  There are real concerns that the present situation is likely to persist for a while still and may result in negative supply chain impacts through the first quarter of 2012.

With the lean inventory situation that the global semiconductor and electronics supply chains have followed since the previous global recession, and as discussed here and here by Smith's MarketWatch, there is very little on the shelves to reach for.  This situation of natural disaster plus lean inventory and reduced orders on demand-soft forecasts is likely to mean significant shortages of components and translate into reduced product to provide during the next quarter or possibly two.  The reduced product availability will have negative impacts on earnings for many in the industry.


Lisa Ann Cairns, Ph.D.
Written on Wednesday, 19 October 2011 12:42 by Lisa Ann Cairns, Ph.D.

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