Hard Drive Pricewatch: Three Months Into the Thai Floods

By on February 7, 2012, 2:59 AM

The hard disk drive supply chain was hit hard late last year when a series of floods struck Thailand. The Asian country accounts for about a quarter of the world's hard drive production, but thousands of factories had to close shop for weeks as facilities were under water, in what is considered the world's fourth costliest natural disaster according to World Bank estimates. That's on top of the human cost of over 800 lives.

Western Digital and Toshiba had factories in the flood zones whereas Seagate was mainly affected by the resulting supply constraints from business partners who were forced to halt production of related components. Among those was Nidec, which produces ~70% of the world's hard drive spindle motors.

All this resulted in hard drive prices shooting through the roof around the end of October as production became more expensive and limited. With the help of price tracking site Camelegg we've checked on a number of mobile and desktop HDDs to get a better overview of how the situation has developed in the last three months.

Read the complete article.




User Comments: 36

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Guest said:

I can bet that HDD manufacturers will post record revenue in 2012.

rpsgc rpsgc said:

Hurray for the "free" market! Hurray for no regulations! Hurray for price-fixing/price-gouging! Hurray for unscrupulous dirtbags who don't hesitate to take advantage of catastrophes to make a buck (because the market must be free)

Capitalism, f* yeah!

Guest said:

Yeah free markets work when all the manufactures in a sector aren't in cahoots to raise prices....I find it hard to believe that every hard drive manufacture was based in that country. If so that isn't very smart and they better think about going somewhere else because history repeats itself. I am holding off buying new hard drives from newegg and other places till the prices come back to reality

p51d007 said:

It's called supply & demand. If the supply is disrupted, and the demand is greater than the supply, the price goes up, so people don't hoard the supply. You obviously are one of the "99%ers" that don't have a clue how things work.

Guest said:

Anyone who thinks the fact that the prices haven't returned to normal yet are entirely dependent on supply-demand, and the free market is delusional. Economics need laws just like everywhere else in society. Unfettered capitalism is an extreme, and ALL things (even capitalism) are best in moderation.

Guest said:

p51d007

The constrained supply wouldn't explain only a 3.1% drop in shipped units and certainly wouldn't be enough to explain the increase in prices by (on average drives are still about 60-90% more expensive than they were before the flooding). Based on the supply-demand curves, the drop in supply would have to be substantially more to justify such steep price increases.

"Seagate on Tuesday reported financial results for the quarter ended December 30, 2011. Shipments of hard disk drives (HDDs) dropped only 3.1% in terms of units, but at the same time the Seagate's earnings increased by 18.5%, whereas the company's profitability rose whopping 375%. With increased pricing and long-term supply agreements, the HDD industry will change for a long time."

http://www.xbitlabs.com/news/storage/display/20120231212837_
eagate_s_Profitability_Skyrockets_Due_to_Constraints_in_Ha
d_Drives_Shipments.html

Also, WD will be at 100% of pre-flood manufacturing capacity already by the middle of the year.

"We expect to be at 100% of capacity in the September quarter. So yes, exiting the June quarter, we'll have to be getting to that run rate," said John Coyne, chief executive officer of Western Digital, during the most recent conference call with financial analysts.

If by end of Q3 2012 prices do not come back to what they used to be, we'll know for certain if these ridiculous new prices are the new normal.

Guest said:

So what if there are big prices; there where big before; look back a few years ...

From my part they can increase the price 10K times, it does not mean that I will buy it .. and then I will have more time to do other things than storing things on a hard drive, copy&move things all the time :)) They are crap anyway, so much years passed and still such a low speed .. maybe it's time to move to something else .. not that the SSD's are the answer; I think at them as a bad joke when you take into account the price that you have to pay for a real speedy drive.

VitalyT VitalyT said:

Yet more reason to use SSD-s instead. Samsung 830 512GB is the best value at 799 USD on newegg.

Sarcasm Sarcasm said:

VitalyT said:

Yet more reason to use SSD-s instead. Samsung 830 512GB is the best value at 799 USD on newegg.

Blah, I'd rather spend $799 on a whole new computer equipped with an i5 2500k.

LNCPapa LNCPapa said:

All you can really do is speak with your wallet. If enough people do so then the customer will take back the power over these pricing strategies.

Tomorrow_Rains said:

not to burst anyone's bubble. but seriously guys... you'd think that there would be backup factories for these kind of incidents, these are technology companies which focus on data storage. They should focus on putting their factories on stilts, or putting them up in the mountains.

mosu said:

Greed backfires: SSD's will look cheaper and the market will shift.A Bluray is cheaper and almost as quick, so backup is resolved, kind of, so will get accustomed not to use big hard drives.

Guest said:

Any bets on whether or not prices will return to normal after production has recovered? I didn't think so.

Greed just feeds more greed.

Guest said:

I have been told by my local vendor here in Mumbai, Lamington Road that they have just received their first shipments of drives after Oct 2011. He expected the supplies to be normal by April-May. He said that these manufacturers are right now fulfilling priority orders for OEMs and then they will ship for consumers like us. It does make some sense for prices to remain high for another 3-4 months.

Guest said:

Some externals have come back closer to "normal" prices. I remember a $70 Western Digital drive jumped up to $140 on Amazon (also limited to 1 per person). Just checked now and its down to $90 (and the limit has been lifted). So prices are coming back down, just not as fast as we'd all like.

Guest said:

I bought a 3TB external in best buy for $149 before the flooding, I haven't getting any HDD after that, instead I got a SSD, but still need another HDD to backup my stuff.

Feels kind of weird expecting what one of your drives could fail any moment someday and you don't have a spare one. But all my important data is in the cloud now. Somehow this situation help cloud services to be really relevant and useful.

PinothyJ said:

That was a very good article...

Guest said:

I bet they will

Reduced expendenture, less production cost in shutdown, government recovery support, insurance probably cover rebuilding costs, and finally higher margin per product sale

= lower expendeture and higher profits

Guest said:

Those low prices we had before was to kill the two other competitors (Hitachi and Samsung) or make them easy to buy them out.

For some reason you people all ignore that fact.

ET3D, TechSpot Paladin, said:

I agree with pinothyj. It was a good read, which put things in perspective.

Guest said:

These price increases are normal in any industry where products are pushed out of equilibrium in commodity status to a rare status. It doesn't matter what causes the rarity, artificial like diamonds, crude oil, farming policies, or natural like a memory factory blowing up in the 90's pushing prices in excess of 400%, a flood that wipes out 70% of the motor supply needed to even build a HDD. It is how economics works. Yes 'evil' corporations love profit but that is the reason they exist. But the fact is HDDs are now rare again and it will take some time for that equilibrium to come back. As long as government stays out of the way, and competitors are allowed to remain in the market it will happen, it always does.

How did we get here? How did the HDD manufacturers get in the predicament of relying soley on a single manufacturer that produced 70% of the world's HDD spindle motors? By consumers wanting lower prices. Increasing competition and very thin profit margins pushed these products to a state of equilibrium where the company is only producing them to stay afloat. Costs need to be cut year over year so the company can show a profit, even if it is minuscule. Shutting down in-house production of motors and outsourcing them will cut production costs benifiting the corporation in some profit and benifiting the consumer in lower prices. People ask why hard drives haven't improved as much as they should have. In 1990 the average consumer HDD was 40MB, in 2000 it was 40GB, we should have 40TB drives by now. My opinion is that R&D has slowed due to lack of demand and lack of funds while producing product in equilibrium for so long. Why spend the millions or billions to develop it when profits needed to pay back this R&D won't materialize?

Have a little faith and look at the bright side. HDD manufacturers once again have a sizable R&D budget. Money also attracts the talent necessary to developed better products. Talent that has likely left for greener pastures long ago. They are not going to pocket it, not if thye want to be around in the future.

Guest said:

So, if we all stop buying hard drives, the prices will fall towards zero?

Don't think so.. you must be in the 99% that believe that supply/demand is still the way that prices are fixed!

Guest said:

This article forgets to mention that many large OEMs started stockpiling drives to ensure they could fulfill orders during the manufacturing outage. That action drove a sharp increase in prices for regular consumers. In addition to the price charts, it would be helpful to see the numbers of units shipped over these same time periods.

Guest said:

Completely agree! Unregulated marked make a few powerful at the cost of many that go down. There will never be a truly free market!

Guest said:

I recently bought a 320gb Spinpoint for a system I was fixing, I was shocked that the price was still as high as it was. I was also pissed because it meant I couldn't ask for as much for labour.

The greatest fear now, I think, is that HDD manufacturers won't be so quick to drop their prices, even as stocks return to normal levels.

Guest said:

rpsgc,

Can you help me understand where you see a better solution than a free market? It is certainly not perfect but in a market where you can buy a 3TB disk for $169US that is pretty efficient. Do you envision some type of world government that can oversee supply and demand? Just how would that work and do you think it would ultimately provide better goods and services at competitive prices? North Korea and the old Soviet Union gave it a heck of a try - but they did come a lot closer to equity for everyone - everyone was poor and couldn't even imagine owning a 3TB disk. I guess a reference to GM and Wall Street in the U.S. would be warranted. However, if government didn't prop up poorly run companies or incent the transfer of risk to taxpayers the markets would have likely corrected the situations - albeit painfully. Again, how do you see government regulating this across global markets? Thanks.

Guest said:

I'm doing my part to keep prices down by reducing demand.

I'm not buying until prices come down.

I've postponed buying computers and other gadgets that use hard drives.

Yes, it hurts the economy but I am doing my part to keep HDD prices down.

hikingmike said:

One thing the article doesn't address is that there have often been limits to how many hard drives a person can buy from different online and brick & mortar stores. Prices may actually be artificially depressed below what they naturally would be if a limit like this is used, so price alone isn't the whole story.

Guest said:

The Tech Industry has obviously never heard the old, but wise advice - Never put all of your eggs in one basket.

We humans sure are dumb for such smart people. We just keep repeating the same historical mistakes over and over. That and the opposable thumb are the two things separating us from animals, because the ability to reason sure isn't in the mix.

Guest said:

Um... If not for free markets driving competition, we'd still be paying $5/MB of disk space.

Although that competition is drying up as HD vendors buy each other.

Guest said:

I can think of some places in the US NOT subject to floods, where access to major markets is excellent (good rail, road and air transport) AND where labor is cheap and land cheaper. Let WDC build a disk drive factory in one of these places. Mind you, no slave labor available like in China, but plenty of government incentives and much lower risk. And maybe if some components start getting made in the US, then maybe more computers will be assembled here.

Guest said:

Stop. You're making too much sense.

Guest said:

What ever happened to Moore's Law?!? Proof that we are being taken for a ride......

Guest said:

If you don't like the price of HDD's, don't buy. When demand shifts, so will the corresponding price on the the supply-demand curve intersection. One advantage I foresee is downward price pressure between competitors for a substitute product: SSDs.

HDD manufacturers produce devices with greater densities, faster speed, and more power efficiency to differentiate and maximize profits. This does not happen for free. Let's face it, HDD's were a bargain; now they are simply priced based on supply. Yes, manufacturers will enjoy increased profits, but prices will eventually settle.

Guest said:

Production was back to normal -- 100% -- in Thailand BEFORE Christmas 2011.

The fact that these high prices are continuing is a SHAM; obvious price gouging on the part of the HDD industry. Buffoons who spout out the usual "supply and demand" drivel as reasons for the high prices must love getting buttreamed. Nothing to do with that. It's plain and simple greed. Another shinging example of unfettered capitalism.

I've bought FOUR SSDs in the meantime. I'll be speaking with my wallet.

When 2TB externals go down to no more than $70, then I'll know these companies are serious about wanting to compete again.

Zilpha Zilpha said:

It's no different than the oil prices. Those never quite came back down to where they should have, either, and no one did a damn thing about it. We just complain on forums, and pretend to be activists.

We are headed for a fall. All great empires eventually do.

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