$1 Billion Short: Hard Drive Shortage Impacts Intel's Q4

News
By Wolfgang Gruener
published

Intel today told investors that the global hard drive shortage caused by the Thailand flood has forced the company to reduce its fourth quarter outlook to a midpoint of $13.7 billion, down from a previous midpoint estimate of $14.7 billion.

Intel's stock was down about 4.7 percent as a result of the announcement. According to the company, sales of PCs will be up sequentially for the quarter, but there are not as many sales into the supply chain as chip inventories are reduced due to the supply disruption in the hard drive industry. Intel expects hard drive shortages to persist through the first quarter and continued improvement of supply during the first half of the year.

There is no consistent opinion from analysts when hard drive supply will be catching up with demand again. IDC, for example, expects some impact to last into 2013, while IHS said that currently added emergency production volumes could lead to a hard drive oversupply by the end of 2012 once the normal production volume is available again.

Several other chip companies were dragged down by the announcement as well. AMD fell by about 4.9 percent, Nvidia by 4.0 percent, Micron by 3.3 percent, Broadcom by 3.1 percent and Texas Instruments by 2.8 percent.

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Wolfgang Gruener
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26 Comments Comment from the forums
  • joey532
    Thats what they get for putting all their eggs in the same basket.
    Reply
  • alidan
    yea, i believe hdds are the reason, and not ipad and phones over taking a bit of the pc market in a big way, or that people dont need new computers if they have damn near any dual core, and better manufacturing makes parts last longer... i totally believe that anyone who needed a new computer (most sales are from pre built) didnt get one because it cost an extra 20-30$ (the bump that oems have to pay for a hdd price increase)
    Reply
  • seezur
    alidanyea, i believe hdds are the reason, and not ipad and phones over taking a bit of the pc market in a big way, or that people dont need new computers if they have damn near any dual core, and better manufacturing makes parts last longer... i totally believe that anyone who needed a new computer (most sales are from pre built) didnt get one because it cost an extra 20-30$ (the bump that oems have to pay for a hdd price increase)
    I don't think you get it. This has nothing to do with tablet/smartphone penetration into the PC market. The floods have caused HDD's to more than double in price and put a strain on the supply chain. Intel does not make huge amounts of profit off of pre-built systems, they make more money off of servers and corporations.

    I'll give an example. My company needed to purchase a storage device which we ordered w/28 1TB HDD's. Dell sold us the device but basically refused to sell us that many hard drives without "justification" then when the order was approved they couldn't give us a solid ETA they just said around 60 days. What this means is a lot of companies simply will not order until the supply chain is restored.

    So while your point about tablets and phones might be true you can be assured Intel is already aware of this as well and that was probably already accounted for in their projections. What they didn't account for was a natural disaster.
    Reply
  • cheepstuff
    joey532Thats what they get for putting all their eggs in the same basket.
    What on earth are you talking about? Intel, AMD, Nvidia, Texas Instruments don't buy HDDs for their own purposes, they sell a complementary product in a common industry.

    They aren't putting all their eggs in one basket any more than you put all your eggs in one basket when you assume your car will start tomorrow. If anything, Intel is competing them because they make SSDs.
    Reply
  • jeraldjunkmail
    What I'd really REALLY like to know is are the replacement parts for the HDD manufacturers that will be sourced from countries like Ireland and the USA be of higher quality, improving the quality of HDD's manufactured in the latter half of 2012?
    Reply
  • CaedenV
    well it isnt my fault, I am enjoying my i7 :)
    Reply
  • CaedenV
    cheepstuffWhat on earth are you talking about? Intel, AMD, Nvidia, Texas Instruments don't buy HDDs for their own purposes, they sell a complementary product in a common industry. They aren't putting all their eggs in one basket any more than you put all your eggs in one basket when you assume your car will start tomorrow. If anything, Intel is competing them because they make SSDs.I believe he is referring to the HDD manufacturers all being located in one area. Every other major manufacturer from CPUs to cars has factories in multiple areas or countries.
    Reply
  • de5_Roy
    intel, amd, nvidia should talk with the retailer so that they don't inflate hdd prices.....
    amd's 4% loss will impact them more than intel's 4.7% loss will impact intel.
    Reply
  • cheepstuff
    de5_royintel, amd, nvidia should talk with the retailer so that they don't inflate hdd prices.....amd's 4% loss will impact them more than intel's 4.7% loss will impact intel.
    Everyone in the industry is doomed to lose money over this, it is a production volume issue. If not as many HDD can be sold, then it follows that not as many CPUs or graphics cards will be either. That cannot be solved by negotiating with the manufacturers or retailers to lower the price.
    Reply
  • Seezur: Hard drives only doubled in price at retail. They did not double in price for OEMs that buy in uber-quantity.

    Your logic reminds me of the article Tom's did years ago suggesting that the price of copper going up was going to drive up the cost of motherboards, even though you're only looking at a couple of ounces, max, which could drive up the cost of manufacturing by a whopping $10 under extreme circumstances.

    If anything, the fact that Best Buy will sell you a Core i3 laptop for $500, or a virtually identical Core i5 laptop that is only 10% faster for $900 shows that there's plenty of wiggle room in OEM PC pricing. Only the sub-$500 price range might necessarily see a small bump in price.
    Reply