Inflated prices produce record revenue for hard drive makers

By on June 13, 2012, 11:00 AM

Last week IHS iSuppli published a report on the state of the hard drive market. In it, they chronicled how mechanical drive prices soared following the October 2011 floods that ravaged Thailand where key manufacturing plants exist for Seagate and Western Digital. The research firm concluded that prices will remain inflated until at least 2014 but a new report out today outlines just how much revenue is coming in via inflated drive prices.

Revenue reached record heights of $9.6 billion in the first quarter, led of course by higher prices and growing (but still low) shipments. The previous revenue record was $9.3 billion set in the first quarter of 2010. Furthermore, only 145 million units shipped in the first quarter of this year compared to 174 million that were moved in the third quarter last year before the floods. Shipment levels aren’t expected to recover to pre-flood levels until the third quarter, or nearly a year after the natural disaster.

Among individual hard drive makers, Seagate has the largest share of revenue at 46 percent, good for $4.45 billion in the first quarter. This figure includes the recent acquisition of Samsung’s hard drive division. This doesn’t come as a huge surprise since Seagate has been the market leader in hard drive revenue for the past decade. Western Digital also ranks pretty high with a 32 percent share while Hitachi and Toshiba each represent 11 percent of revenue.

The average selling price will remain high through 2014 in an effort to make up for some of the losses that occurred directly after the floods.




User Comments: 38

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Guest said:

...and you know they probably cut wages blaming the disaster. That and this price-fixing means pure sweet profit for them.

Ranger1st Ranger1st said:

I don't need new storage so it's a moot point for me, however I like that these mechanical storage guys are acting all arrogant, gives the SSD guys a chance to sneak in the back door and ' layeth the smackdowneth ' on them.. ( haven't been able to use that line in ~ 10 years, awesome). Perfect example is RIm.. sitting on it's laurels and boom, iphone products owned them.

captainawesome captainawesome said:

fricken price-fixing scum.

cliffordcooley cliffordcooley, TechSpot Paladin, said:

Its no surprise they are seeing record highs, when they tripled the price of HDD's after the flood.

Guest said:

So the hard drive industry took a hit to production but can still turn a record profit immediately after? I think that tells you that they, the hard drive industry is screwing us so hard my brain hurts just thinking about it. We seriously allow this to happen? I think we the consumers are getting played by a bunch of greedy fat cats in suits. Grow some brains people and stop buying their crap and the prices will go down.

Wagan8r Wagan8r said:

So the hard drive industry took a hit to production but can still turn a record profit immediately after? I think that tells you that they, the hard drive industry is screwing us so hard my brain hurts just thinking about it. We seriously allow this to happen? I think we the consumers are getting played by a bunch of greedy fat cats in suits. Grow some brains people and stop buying their crap and the prices will go down.

I find it ironic that you lambaste the "fat cats" for utilizing the exact same market solution that you prescribe. It's supply and demand economics. They didn't steal money from people to make their profits rise. They charged a price; people paid said price. If people don't want to pay, no one is forcing them to.

It's exactly the same can be said about Apple products. In my opinion, they're WAY overpriced. BUT, obviously, there are many people who do not think they're overpriced, and so they buy their products; thereby giving Apple record profits. Again, no one is forcing anyone to pay they're asking price.

The difference here is that the hard drive manufacturers actually had supply problems, causing demand to rise, whereas Apple never has supply problems (everything is already your fault anyway with Apple).

Now, if the hard drive manufacturers are intentionally limiting supply to create artificial demand, then yes, off with their heads.

Guest said:

I get the feeling that customers are paying more, employees are probably getting paid less, or worse, getting laid off....and the CEOs are getting raises and bonuses. That's usually the way this works isn't it?

1 person liked this | Guest said:

QUOTE:

"The difference here is that the hard drive manufacturers actually had supply problems, causing demand to rise, whereas Apple never has supply problems (everything is already your fault anyway with Apple).

Now, if the hard drive manufacturers are intentionally limiting supply to create artificial demand, then yes, off with their heads."

REPLY:

they had limited supply problems for short term it was and is still exaggerated, the main concern was logistics but if these companys bothered to invest in those 3rd world countrys infrastructure near their factorys and roads they wouldnt have this issue and we all know those areas are prone to floods due to bad drainage among lack of infrastructure it is a socio economic policy that is lacking while they milkt he workers for $4 an hour or less they then milk consumers and want us to feel sorry for their offshore manufacturing.

If I was a shareholder I would ask why they invested in such an area thatw as prone to these issues with flooding and had no roadmap to deal with it except to inflate prices.

As for ironic yeh it is but it works, simple fact is second hand HDD's are or ahve been looking good for the last 14 months, and not off ebay their is tonnes of them to be grabbed 10x cheaper through PC markets etc.

Ranger1st Ranger1st said:

they took a page from the oil companies; something going on in the mid east? a spill or a fire in the MASSIVE supply line somewhere, create the hysteria of shortage and reap the rewards.. sound familiar.

Staff
Matthew Matthew, TechSpot Staff, said:

I'm no expert here, but unless I'm missing something, the report speaks purely of increased revenue and not of net profit. The companies would have to pull in more cash if they want to offset expenses related to the disaster(s). In addition to repairing their own facilities, I believe hard drive manufacturers have also loaned suppliers money to get their factories running again. Just saying, iSuppli doesn't paint a very full picture and the report seems like an attempt to stoke the predictable knee-jerk reaction of "omg, those greedy companies are laughing all the way to the bank..." when that isn't necessarily true.

Staff
Rick Rick, TechSpot Staff, said:

Ditto. Revenue is NOT equal to profit.

MilwaukeeMike said:

Big thanks to Matthew and Rick for the common sense... That was quite a depressing streak of accusations going there.

From yahoo finance... Seagate (the world's largest manufacturer of HDs as stated in the story) saw revenue increase in Q1 2012 by $1.2 billion over Q4 2011. that's a big jump. Their cost to produce that revenue went up by $700 million. The difference is probably a result of higher prices helping them out. Their profit went up by about $600 million between Dec 2011 and March 2012 as well.

So it does look like the prices are helping out the manufacturers. But as Wagn8r correctly says above... that's econ 101... if the price is too high for you, don't buy it.

Guest said:

They charged a price; people paid said price. If people don't want to pay, no one is forcing them to.

Actually, what are our alternatives? If you don't store your data on the devices that are made by the companies that fully occupy the data storage market, then what do we use? Experimental devices do not interface well with the specifications of design wrought by the establishment. The same establishment that creates the systems we are inherently "dependent" on.

killeriii said:

"The research firm concluded that prices will remain inflated until at least 2014"

I just picked up a 3TB Seagate drive for $145.

How is that inflated?

I also got a 128GB SSD for $175.

PC nerd PC nerd said:

"The research firm concluded that prices will remain inflated until at least 2014"

I just picked up a 3TB Seagate drive for $145.

How is that inflated?

I also got a 128GB SSD for $175.

Try buying a hard drive in Britain...

1TB - £70/$108

2TB - £85/$132

3TB - £115/$178

I know it's our shitty import taxes which push the prices up, but I need a rant, because I can't afford a hard drive to replace my Samsung F3. I'm stuck with a crap Maxtor 250GB which I scavenged from an old computer.

Guest said:

No competition plane and simple. There are only two hard drive manufactures now and the consumer his being extorted.

Guest said:

And you think their profit margin is less now than it was before the flooding?

On what basis do you make this assumption?

Guest said:

"No competition plane and simple. There are only two hard drive manufactures now and the consumer his being extorted."

+1, no one else has caught this. HD companies have been merging like banks and telcoms over the last several years while some got out of the business altogether. And since so many are doing it with their manufacturing operations located overseas, no one has complained. It is now a monopoly, legal and all.

PinothyJ said:

fricken price-fixing scum.
How many BILLION did they spend rebuilding, not only their factories but the infrastructure and communities that depend on them? How about you pull your head out of your arse before you make another embarrassing comment like the one you just did.

Ignorant hack...

Guest said:

The love of money is the root of all evil - plain and simple.

The rich will ALWAYS screw other people, rich being the oil industry, hard drive manufacturers or whatever.

Those turds from Hollywood may also have a finger in the pie as they don't want people buying huge drives to store their counterfeit digital media.

PinothyJ said:

The love of money is the root of all evil - plain and simple.

The rich will ALWAYS screw other people, rich being the oil industry, hard drive manufacturers or whatever.

Those turds from Hollywood may also have a finger in the pie as they don't want people buying huge drives to store their counterfeit digital media.

Either you show some proof or accept you have no idea what you are talking about : your choice....

Guest said:

These inflated prices need to be investigated by some the EU or some commission as the prices should now have stabilized. Some say that the prices should only have been inflated by 28-30 % but I have seen many an occasion where suppliers have inflated to 100-200 %. Someone is making a buck and we the consumer are definitely being taken for a ride. Someone needs to do something now and fine Seagate and WDC for these high prices due to monopoly .

Guest said:

...some commission.....Some say....should have....have seen many (name two!).....Someone is.....Someone needs........ ...some might say the lack of precision is because you know the square root of sod all about any of it!

cliffordcooley cliffordcooley, TechSpot Paladin, said:

...some commission.....Some say....should have....have seen many (name two!).....Someone is.....Someone needs........ ...some might say the lack of precision is because you know the square root of sod all about any of it!
Is there an interpreter around to make sense of this, especially the text in bold?

Guest said:

The world is so corrupt!! It actually breaks my heart, and makes me sick to my stomach. Too bad the most prominent feature of the planet's dominant species is greed. Disgusting.

Zoltan Head said:

fao cliffordcooley - the guest post you refer too is commenting on the one immediately preceding it. The item in bold is fairly well-known colloquial UK English.

Guest said:

it isn't known to me.

Guest said:

Profit gets calculated AFTER costs and Expenses.

So, their profit numbers should take into account the cost of rebuilding. Unless they have not started to rebuild yet. Or if they are able to, they might be including the cost as it is incurred monthly, which means the entire cost of rebuilding will be spread out over the time it takes to rebuild.

but, either way, it shows rebuilding expenses as "part" of the profit.

unless they have not started to rebuild yet.

MilwaukeeMike said:

"No competition plane and simple. There are only two hard drive manufactures now and the consumer his being extorted."

+1, no one else has caught this. HD companies have been merging like banks and telcoms over the last several years while some got out of the business altogether. And since so many are doing it with their manufacturing operations located overseas, no one has complained. It is now a monopoly, legal and all.

This is how business with a large barrier to entry work. In the 50s there were many car companies in USA, they merged and died until now we have 3 big ones. Look at processors, look at operating systems, look at video cards, and look at cell phone carriers if you want to see the mergers. They all have very few players (next will be airlines). As long as there's more than one, we're ok. And HDD builders have to compete with SSD makers now. Not completely, but there's overlap.

Night Hacker Night Hacker said:

Stop moving production overseas and perhaps this wouldn't happen? Actually scratch that, greedy unions would push the prices higher instead. Consumers lose either way.

Be nice to see larger cheaper SDDs. Fat chance but I can dream.

The greed in this world is getting out of hand though. Something has to give sooner or later.

captainawesome captainawesome said:

How many BILLION did they spend rebuilding

The mere fact that you have ask shows that you don't know. Many of the losses were recovered against insurance. You think the companies were so blind that they thought a natural disaster couldn't strike.

No, the truth is that they have already recovered everything spent on rebuilding their factories.

Initially, Coughlin's report claims, the extra income from the inflated prices will be used by companies to recover losses made as a result of the flooding. After that, however, prices are expected to remain at an inflated level in order to fund additional research and development into next-generation storage systems.

In other words: we'll be so used to paying higher prices for hard drives by 2014, manufacturers will be unwilling to drop the prices even if it could be afforded.

SOURCE: [link]

Guest said:

This actually proves that HDDs were underpriced before.

Jack Reacher said:

Well HDD manufacturers, you will have to excuse me because I am not buying any of your crap. I've robbed extra HDD out of computers that I own that were rarely used or needed. I have enough HDD to last me with new builds to 2015. One year after you finally start remembering who made you a successful business... The CUSTOMER. The one you've been trying to screw for the past several months. By the way, who's great idea was it to locate your businesses in a 3rd world country with flood problems? Great planning and the unemployed in this country are really thanking you for taking your jobs overseas. You scum bags

cliffordcooley cliffordcooley, TechSpot Paladin, said:

By the way, who's great idea was it to locate your businesses in a 3rd world country with flood problems?
Why does TechSpot allow prejudice between countries? That is not much different than personal attacks.

Jack Reacher said:

Why does TechSpot allow prejudice between countries? That is not much different than personal attacks.

Personal attack? doh! Grow up, Cliffy ... Now go paint some butterflies or some other liberal loon activity.

cliffordcooley cliffordcooley, TechSpot Paladin, said:

Personal attack? doh! Grow up, Cliffy ... Now go paint some butterflies or some other liberal loon activity.
I felt the very same thing when you made the statement "3rd world country" and qualifying it not fit for business.

Night Hacker Night Hacker said:

And how many billions have they saved out sourcing labour to other countries. Seems to me that it balances out.

Guest said:

Market Dynamics at work. If you don't want to buy then don't. Regards of what you think you are still the one with the power to shift the market. It's based on supply and demand so unless you really need the hard drives, don't buy. The hard drive prices have forced me to go into my backups and really think about what data I truly want to keep, turns out we had a bunch of projects archived we had not touched in years. We deleted a ton of old work and then I had more than enough space for our new projects. If the price had been low I might not have ever gone through the archives to do some house cleaning.

That's my take.

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