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The Southeast Asian country’s worst flooding in 50 years reveals the scale of its industrialisation and the extent to which the global car and computer industries rely on components made there, writes THOMAS FULLER
IN the neck-deep floodwaters of an industrial zone in Bang Pa-In, workers are using jetskis and wooden skiffs to transport stacks of computer components out of waterlogged factories.
Three weeks after monsoon runoff swamped more than 1,000 factories across central Thailand, the brown, corrosive floodwaters have only slightly receded, leaving the world's largest computer-makers uncertain about when crucial parts will be once again available.
Consumers worldwide could see increases of at least 10 per cent in the price of external hard drives because of the flooding, said Fang Zhang, an analyst at IHS iSuppli, a market research company.
The effect would be less noticeable on laptops and desktop computers, he estimated, because demand has been weakened amid the current global economic malaise.
The image of Thailand as a land of temples, beaches and smiles has been reinforced over the years by the country's tourism advertising campaigns. But the flooding, the worst in at least five decades, has revealed to the world the scale of Thailand's industrialisation and the extent to which two global industries, computers and cars, rely on components made here.
Until the floodwaters came, a single facility in Bang Pa-In owned by Western Digital produced one-quarter of the world's supply of "sliders", an integral part of hard-disk drives.
Over the weekend, workers in bright orange life-jackets salvaged what they could from the top floors of the complex. The ground floor resembled an aquarium and the loading bays were home to jumping fish.
Like spice merchants clustered together in a Turkish bazaar, the world's biggest names in hard-drive manufacturing operate from Thailand, a symbiosis of suppliers and their customers.
"Surely one of the inevitable impacts of this is that never again will so much be concentrated in so few places," said John Monroe, an expert on storage devices at Gartner, a technology research firm.
He estimated that it would take a full year for hard-drive production to return to pre-flood levels of 190 million units per quarter.
The shortage is not entirely bad news for the disk-drive business, especially for those companies whose facilities were not damaged, like Seagate, which has a factory high on a plateau in northeastern Thailand.
Monroe said price increases would help lift industry profit margins to around 30 per cent, from around 20 per cent before the floods.
The flooding, which is now spreading through the northern reaches of Bangkok, is the second reminder this year of the vulnerability of global supply chains, coming six months after the earthquake and tsunami that struck Japan and shut down facilities that produce crucial car electronic components.
Thailand became a hub for Japanese car manufacturers in the 1980s and 1990s, partly because car manufacturers sought to escape the punishing impact of a rising Japanese yen.
Today, as a measure of Thailand's importance to the global automotive supply chain, the flooding has forced Toyota to slow production in factories in Indonesia, Japan, Malaysia, North America, Pakistan, the Philippines, South Africa and Vietnam.
Honda, the car manufacturer that is most affected by the floods in Thailand, has also slowed production at factories in several countries.
The initial forecasts of damage to the car industry were too optimistic, said Hajime Yamamoto, the Thailand director of IHS Automotive, an automotive market forecasting company based in Detroit.
"It's getting even more serious than what we expected. Every week, we actually revise our estimate for the scale of losses."
He estimated that Thai auto production would fall to 1.65 million units this year, from 1.8 million.
Car manufacturers and their suppliers would now seek to diversify their operations to other countries, Yamamoto said.
"They will try to balance their expansion so they don't have concentration of risk in Thailand," he said, citing Indonesia as a likely alternative.
The slow-moving floodwaters, which are an accumulation from unusually strong monsoon rains in northern Thailand this year, are gradually draining into the sea.
At what is known as the Bang Pa-In Industrial Estate, lorries have delivered massive pumps.
Workers said they would start trying to remove water from the area on Monday.
The floodwaters descended to this area 75km north of Bangkok early last month. Efforts to defend industrial areas with sandbags and other barriers were futile.
"There was no way we could have held back the water," said Samruay Pakubol, a welder at an automotive parts factory in Bang Pa-In.
Now out of work, he navigates a wooden boat down the streets of the industrial zone, taking passengers like a Venetian gondolier.
Workers have caught and killed crocodiles swimming in the area, he said.
Dale Schudel, managing director of IntriPlex Thailand, a company that makes components for hard-disk drives, said his factory in nearby Ayutthaya had floodwaters about 1.8m deep.
But pumping out the water, which would take about two to three weeks, is only the beginning of the cleanup.
Schudel described the water as "highly corrosive".
"I think you have to ask yourself, if any factory in the world were submerged in that much water, how much damage would there be?"
Schudel predicted that the majority of companies affected by the flooding would rebuild their factories in Thailand. "Their customers are here and their suppliers are here."
But like other investors, Schudel said he was looking to the government to put in place flood prevention measures.
A large share of the industrial growth in Thailand has occurred on the floodplain north of Bangkok. Rice paddies were paved over to make way for factories, suburban housing and shopping malls, blocking the natural path and absorption of water during the monsoon season.
Last week, the Thai science and technology minister, Plodprasop Suraswadi, told a Thai newspaper that he was "one million per cent sure" there would be flooding again next year.
"This is a natural phenomenon that you cannot escape," he said. "We are living in a period of climate change."
The country must build canals and drainage systems and adapt its roads and crop-planting schedule to mitigate future flooding, Plodprasop had added. -- NYT