It has been over a half-year since Thailand first began experiencing the exceptional rains of 2011. It is over two months since the October crescendo began and only recently are we seeing re-openings and concrete assessments of timelines for the hard disk drive (HDD) supply chain based in Thailand.
Earlier this month, ON Semiconductor announced here that it will be moving the vast majority of its Thailand operations to Malaysia, The Philippines, and China:
"It has been determined that given the severity of the flood damage to the production facilities ON Semiconductor operates in Thailand, and the excessive cost required to recover and reconstruct these facilities, that it is not financially viable for us to fully re-start our probe, assembly and test operations in Thailand for an indefinite period, if at all. As such, the company is ceasing all production at its SANYO sites in Ayutthaya, Thailand, and plans to maintain limited production at its Bang Pa In site."
Hana Microelectronics has just announced in an exclusive interview with Bangkok's The Nation here, that the severe flooding in Ayutthaya Industrial Park incapacitated facilities where 35% of Hana's revenue comes from. Upon recent completion of assessments, Hana determined that the extensive period of flooding "[…] had caused estimated damage of US$35-40 million (Bt1.1-1.2 billion) to the company's machinery and production facilities at High-Tech Industrial Estate." During the flooding period, some essential equipment was moved, with assistance from the Royal Thai Navy, to Hana's other Thai facilities to continue operations as best as possible. Hana intends to stay in Thailand and repair or replace the equipment at Ayutthaya, but will be cautiously watching the reaction of their clients to determine their long-term Thailand operational strategies. Hana expects to reopen the Ayutthaya facility in mid-February; over 95% of revenue from the fourth quarter was lost at this site.
While some are reopening and others are walking away from their severely damaged facilities, the fact of the matter is that the damage from the flooding in Thailand crippled seven High Tech Industrial Parks, and those in Ayutthaya and Rojana were among the worst. It will still be several months until a full cleanup, rebuilding and resumption of operations is in place.
Simply put, the equipment at these facilities were completely submerged in deep, fetid water for roughly six-weeks. The staggering amount of debris is now a new obstacle. There is a crippling problem of how to handle the immense, rusting, rotting piles of industrial and office rubbish.
According to a recent review of the situation here by a reporter to AFP newswire, "The disaster caused billions of dollars of damage and dealt a severe blow to the global supply chain. There are also questions about whether insurers will continue to cover companies located in the flood-prone region."
Toyota and Honda, along with many others in the automotive industry, are still dealing with massive clean-up projects and have yet to re-open facilities to full-production. Toyota still does not know when eight of its factories will be able to reopen because of the immense reparations and recovery projects that must be completed.
Optics, automotive, semiconductor components manufacturers and especially the HDD sector are still reeling from the massive destruction of their supply chains and the inventory that could not be saved. Presently, the supply chains have been able to use what was in progress and en route as end-stage products. As we move into 2012, it is clear that the disruptions and shut downs that are ongoing will continue to hurt these industries and supply chains. Continued tight supply will be the norm for 1H12, minimally.
Whether Thailand is able to keep these manufacturers in the kingdom has yet to be cemented. According to the same AFP report:
"Thailand's Board of Investment is planning to invite chief executives to Bangkok next month for a forum at which it says long-term flood prevention measures will be announced. […]
For flood-stricken firms, action cannot come soon enough.
"All of us are very sick. We fought very hard. We're very tired ... If the government wants to do something, (they) must announce it quickly," said Yeap Swee Chuan, head of auto parts maker Aapico Hitech."