How Flooding in Thailand Hurts Intel’s Sales

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Credit: Ryan Anson/Bloomberg via Getty Images

Intel lowered its fourth-quarter sales forecast due to recent flooding in Thailand.

Intel, the world’s largest microchip maker, lowered its sales forecast by $1 billion due to a shortage of hard disk drives caused by the recent severe flooding in Thailand, the company said Monday. Thailand is one of the world’s major production centers for hard disk drives, and if computer manufacturers don’t have enough supply of them, their PC production will slow, reducing their need for Intel microchips.

The technology bellwether said it now expects fourth-quarter revenue of $13.7 billion, down from the previous expectation of $14.7 billion.

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Intel’s reduced forecast is a stark reminder of how major events — including natural disasters — on the other side of the world can impact U.S. companies. Thailand is responsible for one-quarter of the world’s hard disk drive production. Starting in the monsoon season in late July, Thailand began to experience its worst flooding in decades, shutting down large sections of the country’s economy. Major international firms within Thailand’s flood-ravaged region have been affected, including Western Digital — one of the largest manufacturers of hard disk drives in the world.

Intel shares were down nearly 5% in midday trading on Monday. Despite the company’s reduced fourth-quarter sales forecast, the company said in a statement that PC sales “are expected to be up sequentially in the fourth quarter.” Intel said the effect of the Thai flooding on the supply of hard disk drives is expected to continue into the first quarter of 2012, before returning to normal by the middle of the year.

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The disruption in the Thai supply of hard disk drives adds another headache for an industry that continues to be affected by the overall sluggishness of the U.S. economy. With unemployment well above 8%, consumers are carefully weighing their purchases, especially for pricey goods like laptop and tablet computers, many of which contain Intel chips.