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Thai floods avoid capital but hit manufacturing

Bob Moon Oct 26, 2011

Thai floods avoid capital but hit manufacturing

Bob Moon Oct 26, 2011

Kai Ryssdal: Monsoon rains have been pounding Thailand for a good couple of months, since July. Now the capital of Bangkok is being threatened, so rising waters are being diverted to neighboring flood plains.

Which, as it happens, are home to a lot of the industrial parks that supply the world with everything from high-tech auto parts to components for cameras and computers. Our senior business correspondent Bob Moon reports.

Bob Moon: The world’s leading makers of computer hard drives are grouped together in Thailand’s industrial parks. The tech firms say it makes sense to squeeze out cost efficiencies by concentrating their production.

Steve Shattuck speaks for hard drive maker Western Digital.

Steve Shattuck: We can leverage the skills of a local workforce when industries like ours are clustered together. Many of our suppliers are in the same area. That enables us a lot of benefits. Local governments also encourage that.

At Pipeline Data, analyst Mark Gomes says these firms have put themselves at risk because of tough times.

Mark Gomes: This kind of speaks to the lengths corporations have gone to keep profits rising in a sub-par economic environment. You cut down tremendously on logistical costs. Problem is, it exposes you to an event such as this.

He’s talking about the floodwaters now swamping the sites Thailand chose for its explosive industrial growth.

Gomes: The problem is that with all the asphalt and concrete that’s been laid across the entire country, there’s now a lot less drainage area for the water.

Gomes says one of the biggest problems is the tiny motors and other components to make the computer drives are produced mainly in Thailand.

And that’s got even Apple’s new CEO Tim Cook bracing for trouble. He spoke to analysts in a conference call.

Tim Cook: It is something that I’m concerned about. I’m virtually certain there will be an overall industry shortage of disk drives as a result of the disaster. How it affects Apple? I’m not sure.

Analysts fear it could cause a chain reaction affecting everyone from chipmakers to PC builders — and even car companies. And they say the effects could linger well into next year.

I’m Bob Moon for Marketplace.

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