In the first half of 2011, Thailand accounted for a significant percentage of worldwide HDD production. As of early November, nearly half of this capacity was directly impacted by the flooding. It will take longer for the area to recover than othere locations. Photo from Huffington Post online. 

A severe monsoon season in Thailand, which triggered massive flooding and that started in July and continues to a lesser degree this month (December), is impacting availability and pricing of hard disk drive (HDD) components inside security video storage and retrieval systems. Depending on the country of origin of the devices, the fallout is lack of availability of some product from security manufacturers and price increases.

Based on interviews by Today’s System Integrator, the crunch may at least last through April 2012 and the price increases, well, could be more lasting, maybe even ever-lasting.As of December 3, some areas in Thailand still remained under up to six feet of water and many factory areas remained closed. As for the price rises, the flooding has affected the entire hard drive industry. Western Digital, a major producer, said it expects industry shipments in the December quarter to be limited to 120 million units while demand will be for 170 million to 180 million units. “The company believes that significant industry supply constraints will continue in the March quarter and beyond,” according to a company statement.

While no one knows exactly, it’s estimated that about 40 to 55 percent of HHDs are made in Thailand. Today’s interconnected global supply chain, coupled with a challenged U.S. economy and “just in time” inventory strategies by integrators and makers of security-centric digital video recorders (DVR), network video recorders (NVR), and servers, created a perfectly awful storm. And there is no doubt that such situations — weather, earthquakes, revolts, strikes, terrorist attacks, parts shortages — will rain down on security integrators in the future.

Mike Painter of Security-Net, a collaboration of high level security system integrators, says that not all sources and sizes of drives will be affected. “Manufacturers not in Thailand, HP for example, will not show shortages. But that may not be the case when it comes to price increases.” Shortages from one place impact the overall market; more demand than supply naturally can goose up price.

In mid-November, Jeremy Hockham, president of sales, Americas at Bosch Security Systems of Fairport, N.Y., e-mailed a letter to integrator customers in which he related that “we are doing everything in our power to minimize the impact of this natural disaster on your business. However, certain video recording devices will have limited availability until suppliers are able to resume production and delivery of the necessary components.”

The hard disk drive shortage caused by the Thailand flooding may encourage integrators and end users to look more differently at their needs, says Shahar Ze' evi of Tyco Security Products. That could be a good thing.

He stated at the time that some products will be delivered with only one internal hard disk. “By limiting the internal storage, we can maximize the installations you are able to complete, with the option to easily add additional disks once HDD production and availability increases.”

The Bosch letter indicated a price increase on digital video recorders and disk arrays. “We plan to reverse this increase as soon as market pricing for HDDs allows.”

Another security vendor, Dedicated Micros, of Chantilly, Va., and part of the AD Group, sent out a letter on Thanksgiving Day in which it stated it would hold off any potential additional surcharges until after November 30. “We will review the situation every week thereafter and will provide a further update if the situation changes,” says Pauline Norstrom, director of worldwide marketing, Dedicated Micros. Products covered include the Dedicated Micros range of hybrid DVRs/NVRs and enterprise video servers.

At the First Alert Professional Dealer Convention in mid-November, Scott Harkins, president of Honeywell Security Group of Melville, N.Y., spoke about the matter, as reported by SDM’s Heather Klotz-Young in a recent blog.

Harkins reported that estimates have the Thailand floods causing a 28 percent quarter-on-quarter drop in hard disk drive production. He also emphasized that the disaster would lead to a shortage and increased prices. But he emphasized that Honeywell continues to monitor the situation and look for other solutions and/or hard drives. “I’m not worried about cost, I’m worried about availability. It could, not definitely yet, but it could be hard to find DVRs in the marketplace. Prices are going up — there is no escaping it — while availability is probably going down. It could be a very difficult first few months in the upcoming year in the DVR market.”

Optiview, a wholesale security video distributor and manufacturer in Jacksonville, Fla., says it has “scrambled” to purchase and stock as many hard drives as they could to prepare for customer needs. “So we have done everything we can to prepare for this shortage. We even drove all over the city and bought every hard drive on the shelf that people would sell to us,” says Dave Page, president of Optiview. “We are recommending to our customers that they purchase the least amount of hard drives per DVR that they can get the job done with. In a few months the prices should come down again. Then they can install more hard drives in the DVR when it’s more economical to do so,” Page says.

Among those interviewed by Today’s System Integrator, there is consensus that one and two terabyte HDDs have been most affected. Dave Engebretson of Slayton Solutions Ltd., Chicago, and SDM magazine’s contributing technology writer, suggests integrators “check with their DVR/NVR vendor regarding the types of hard drives used in a current product line, and whether this flood will affect delivery and/or prices.”

Now, for this challenge, and into the future with others, Painter advises that integrators need to “be careful with the manufacturers you represent. We can’t afford to do all the stocking ourselves. So, if you represent too many products with too many specialty components or parts,” there may be a problem when push comes to shove. “Focus on best in breed.”

Shahar Ze’evi of Tyco Security Products. Orlando, Fla., suggests that some HDD buyers may complicate the shortage. “They think hard drives are all the same. There are different types of drives and sizes of drives.” He predicts prices could increase up to almost 50 percent.

But integrators who think they can run to Best Buy and grab everything off the shelf may be mistaken. “There are two different types of drives — consumer and professional. The buyer must beware. Buying the wrong thing can cause more harm than good.”

Painter agrees, “Check the rating of the storage or the server type machine. You may pay a little more but you see the difference.”

Ze’evi also suggests integrators work more closely with manufacturers. “You have to know the pipeline.” When considering your needs, he says to give more lead time to the manufacturers and sources. “Keep open communications. Increase the lead time. You may not have to issue a purchase order, but give a heads up. We haven’t seen the worst yet.”