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UPDATE3 Thailand Flooding Forecasts Delays for High-Tech Parks, Company Assessments Still Pending


The situation in Thailand is still in a critical and mounting phase.  Bangkok is increasingly experiencing flooding, although the government continues to try to keep the downtown business hub accessible and fully functional.  However, slip gates in many of the Bangkok suburbs, particularly to the north and east have had to be opened to alleviate the water back-up that would otherwise create an uncontrolled release situation.  As a result, Don Mueang, the northern airport servicing Bangkok was shut down today, 10/25/11, due to flooding on the runways and all of the surrounding access roads, as detailed in this post from Bangkok Post.

Logistical nightmares continue and that is a critical point for the semiconductor and electronics supply chain.  Importantly, it is not just those companies whose facilities are presently under anywhere from one to four meters (roughly three to twelve feet) of water, but the fact that with over one-third of Thailand underwater, particularly the routes from central provinces to the wider Bangkok area, the ability to either receive, deliver or move parts is greatly constrained or impossible.


In terms of understanding the duration of the flooding situation, the Thai government has released some indications of initial guesstimates for timelines and subsidies, as cited here in Bangkok Post. Specifically, the flooding is expected to continue through early to mid-November.  Once the flood has stabilized and begun to recede, it is expected to take approximately one quarter (12 weeks) to drain, or be drained, away.  After that time, there is the facility rebuilding phase which the Thai government has promised "full financial support" to the seven affected Industrial Parks which include 1,300 factories: "For estates incapable of raising funds for immediate investment in infrastructure rehabilitation, the government would act as a middleman to seek new investors to take over the projects," as cited in this article in Bangkok Post.

The rebuilding phase is where optimistic numbers are beginning to be showcased.  Some Thai officials are claiming that some parks would be "rehabilitated" in as short as 45 days after water removal.  However, some owners of facilities and/or Industrial Parks are claiming that it could take up to one-year to reach pre-flood conditions (see this commentary from CNBC).  It is critical to underscore that these are speculative guesstimates at this point.

What is certain is that the semiconductor and electronics supply chain companies are still in a holding pattern with the ability to make assessments, whether they are directly affected (and currently under water) or in a non-functional island state currently.  Too much remains in flux because the flooding is still mounting and attention is presently on the extent to which parts of Bangkok itself can be spared.  Recall, the second high tide is due to begin later this week and last roughly three days.  We do know that the next couple of quarters will see significant disruptions to the PC (see this recent update from Reuters), HDD (see here from CBSNews, and here from The Nation), and Optic supply chains (see this recent update on EMCORE from MarketWatch Wall Street Journal, and this report on Fabrinet from Total Telecom).  The extent and depth of losses and shortages is still being determined.  We hope to have more concrete news later this week or next week, depending on the ability of companies to get to their factories, understand their work-around capabilities and the forecasts for how much non-Thai based facilities will be able to handle to make-up for the ongoing disruptions due to the flooding.

Regardless of what happens next, what is certain is that Thailand's GDP forecasts have been downgraded to anywhere from 0.5% and up to the 2% range, depending on the extent of damage to Bangkok and the impact on logistic hubs (airports, ports, etc.).  There is a severe humanitarian crisis presently and the situation will only worsen before it eases.

We at Smith MarketWatch will continue to provide concrete updates based on verifiable sources throughout the terrible natural disaster so tragically affecting so many people in Thailand.

Lisa Ann Cairns, Ph.D.
Written on Tuesday, 25 October 2011 13:21 by Lisa Ann Cairns, Ph.D.

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