IHS iSuppli: Hard drive prices won’t return to normal till 2014

Global supply of mechanical hard drives will recover from last year’s Thai flooding in the third quarter, but prices aren’t expected to return to their former levels until 2014, according to the latest report by IHS iSuppli. The market research firm says consolidation in the industry, not shortages, will be to blame for keeping prices high:

“HDD manufacturers now have greater pricing power than they did in 2011, allowing them to keep ASPs steady,” said Fang Zhang, analyst for storage systems at IHS. “With the two mega-mergers between Seagate/Samsung and Western Digital/Hitachi GST, the two top suppliers held 85 percent of HDD market share in the first quarter 2012. This was up from 62 percent in the third quarter of 2011, before the mergers. The concentration of market share has resulted in an oligarchy where the top players can control pricing and are able to keep ASPs at a relatively high level.”

Because of the floods in Thailand and ensuing component shortages, IHS iSuppli says average hard drive prices soared from $51 in the third quarter to $66 in the fourth quarter. Since then, however, they’ve essentially held steady. The firm projects a minuscule decline to $65 in the second quarter of this year.

That doesn’t track with the recovery from the supply side. Shipments reportedly rose from 145 million in the first quarter of 2012 to 159 million in the second quarter, and IHS iSuppli expects further growth to 173 million next quarter. “This will mark the first time in 2012 that shipments will exceed their 2011 quarterly levels,” it says.

I could forgive inflated prices if hard drive makers were suffering, but that doesn’t seem to be the case. Western Digital’s latest financials show a 230% net income growth between the third quarter of its 2011 fiscal year, which ended before the floods began, and the same quarter this year. (Revenue also went up 30%.) Seagate, meanwhile, saw its net income soar from $93 million to $1.1 billion over the same time period; it even went so far as to spend $1.2 billion on dividends and buybacks.

Comments closed
    • Eckre
    • 7 years ago

    Stupid oligopoly….

    [url<]http://news.softpedia.com/news/HDD-Crisis-Was-Fake-Seagate-and-Western-Digital-Post-Big-Profits-266676.shtml[/url<] here are some TRUE before and after pricing charts: [url<]http://darrellx.com/2012/05/03/remember-remember-what-seagate-did-last-november/[/url<]

      • Ragnar Dan
      • 7 years ago

      Darrellx accuses Seagate of things including price increase figures which are 1.0 higher a multiple than actual (meaning if a thing doubles in price, he says the price went up 200%, instead of up to 200% of the original price), and he’s actually using Newegg’s retail prices which aren’t necessarily closely related to Seagate’s prices to them.

      He also claims bad ethics on Seagate’s part, thinking that because their plants were out of the flood plain their prices should not have risen, even though many of their hundreds of local suppliers were completely flooded, as mentioned in the Bloomberg article I linked in my [url=https://techreport.com/discussions.x/23058?post=643058<]previous post[/url<].

    • Chrispy_
    • 7 years ago

    I assumed that this reboot of the hdd market would generate some new competition:
    [list<] [*<]Demand is high [/*<][*<]Prices and profit are high [/*<][*<]SSD's have eaten away some of the need for the low-profit, low capacity drives [/*<][*<]The two main players aren't being competetive (12x higher net income)[/*<] [/list<] I certainly miss the days of competition driving the technology, speeds and standards forwards: Conner, ExcelStor, Fujitsu, IBM, Maxtor, Quantum and Samsung all had boring commodity products but also innovated to give us more choice like the Quantum Bigfoots, IBM Deathstars etc. They had their problems, but also their advantages.

    • Krogoth
    • 7 years ago

    ITT: people spoiled by bargain basement prices for HDD in the pre-flood period (2008-2010).

    • Ragnar Dan
    • 7 years ago

    Egad, the ignorance and appeals to violence here. It’s sad.

    HD prices won’t fall to pre-flood levels until the cost of having to replace all the destroyed plant and equipment is recouped. The notion that the makers can invest their increased price-based revenues in R&D is called the broken window fallacy, made famous by economist Frederic Bastiat.

    The notion that “competition”, as defined by the state, is necessary for “markets to work” was made famous by political monster Karl Marx, and those who wish totalitarian power. It is regulation and taxation which reduce entrants in markets, and cause loss of productivity and profit, which is the purpose of all work.

      • bitcat70
      • 7 years ago

      [quote<]HD prices won't fall to pre-flood levels until the cost of having to replace all the destroyed plant and equipment is recouped.[/quote<] Would insurance cover any of that?

        • Ragnar Dan
        • 7 years ago

        One would expect so, especially since the I believe both of the major companies involved were founded in the U.S. and that sort of thing is standard procedure for American-based and other modern corporations. But I do not know, nor do I know how much coverage they could get in a place like Thailand (though one expects that by locating there it must be generally acceptable), and I forgot to mention the lost time of production and sales, etc. And [url=http://www.bloomberg.com/news/2011-11-17/seagate-s-luczo-raises-prices-while-bracing-for-worst-in-thai-floods-tech.html<]here's an article[/url<] in Bloomberg mentioning that while Seagate avoided most of the flooding, their suppliers weren't so lucky. Their CEO says it will be the end of 2012 before production returns to pre-flood levels. And perhaps the low number of drive makers [i<]is[/i<] actually causing a portion of the higher prices and the firms could lower them sooner if there were more competitors threatening to take market share by doing so. As others have noted, we are fortunate that SSD's are coming in to compete (and I expect eventually replace) mechanical drives, but I'd look for something in regulatory costs or taxation being at least in part behind the number of drive makers declining to so few. The companies have to be larger to profitably comply especially in the U.S., and while some of the other makers were bought out (such as Maxtor by Seagate, and before that Quantum by Maxtor), others may have just gone bankrupt, though that doesn't necessarily mean it wasn't at least in part due to their poor products or poor business operations.

      • Eckre
      • 7 years ago

      Egad, the ignorance.

      WD and Seagate were not affected by the floods, their elevation is such that their factories were unharmed. So how much longer will it take them to replace the destroyed plant and equipment sir?

        • Ragnar Dan
        • 7 years ago

        It’s their hundreds of suppliers, Mr. [b<]Eckre[/b<], who were directly affected. And my earlier remark failed to include the resulting loss of production as a cost. [b<]Edit[/b<]: As for WD, I don't need to seek an article on their situation, because if they had any suppliers in the same flood plain, they were similarly affected.

    • brute
    • 7 years ago

    when their factories were flooded they should have grown rice in them so we could have delicious treats while we waited for the hard drives

    • Arclight
    • 7 years ago

    By 2014 SSDs might become too tempting compared to HDDs (unless massive storage is your thing, i mean all that pr0n has got to go somewhere am i rite?)

    • tbone8ty
    • 7 years ago

    hahah what a joke…only a matter of time before theres a lawsuit for floodpricefixing

    • jjj
    • 7 years ago

    First of all,supply is better but not enough,inventory in the channel is still low.
    Second,you are blaming the wrong people,retail prices are up so much not because of the HDD makers,as the ASP shows their prices are up but not as much as prices in retail.

    • albundy
    • 7 years ago

    i guess thats good news for SSD R&D. they might even catch up to HDD capacity/pricepoint!

      • rrr
      • 7 years ago

      I wouldn’t expect SSD’s to catch up with HDDs in $/GB soon, but I wouldn’t be surprised that actually making SSD market more relevant could be a secondary factor in keeping HDD prices high. After all, both Seagate and WD do have SSD offerings too.

    • TheBulletMagnet
    • 7 years ago

    So what are the other choices aside from Seagate and Western Digital?

      • dragosmp
      • 7 years ago

      Toshiba for slow 2.5″ drives. Otherwise what could drive prices down is lowering demand in the consumer space due to SSD adoption.

      Toshiba did say they’re planning to release a HHD this year though which hopefully would put some pressure on the leading duopoly.

        • TheBulletMagnet
        • 7 years ago

        So at this point, if we want to be responsible consumers its looking like SSD’s and Toshibas?

    • Dposcorp
    • 7 years ago

    Prices are not quite as bad as this report makes out, if you keep an eye out for deals.

    Today Newegg has a 2TB, 7200RPM SATA6 Hitachi with 3 year warranty for $109.

    [url<]http://www.newegg.com/Product/Product.aspx?Item=N82E16822145369[/url<] $129 - $20 using promo code (EMCNDNC22) shipped free, with 3 year warranty. Not bad at all. All the 2TB low power, low RPM Seagates I am running were only a little less then that, however, they all came with 5 year warranties. At this stage. I think the warranty reduction on so many drives is a bigger story then price.

      • mcnabney
      • 7 years ago

      Hitachis were frequently selling for about 3.5 cents per GB pre-flood. So prices still have to drop from 5.5 cents. Take another $40 off that drive and we will have gotten back to 2011 levels.

        • Dposcorp
        • 7 years ago

        Please do not give out false information with a blanket statement like that.
        $ per GB is not the same for every size drive, every speed or every manufacture.

        You are saying that these 2TB, 7200RPM, SATAIII drives were $69 shipped before the floods, and that is WRONG, based on Newegg’s price tracker for that Item.

        Graphc and info here:
        [url<]http://camelegg.com/product/N82E16822145369[/url<] Sumamry of Recent changes Type Price When Current $139.99 May 30, 2012 Highest * $229.99 Nov 01, 2011 Lowest * $104.99 Sep 22, 2011 Average + $148.56 Lowest it has ever been is only $5 cheaper then what I posted. Here endeth the lesson 🙂

          • mcnabney
          • 7 years ago

          2TB Hitachi drive price bottomed out at $69.99.
          [url<]http://camelegg.com/product/N82E16822145475?locale=US[/url<] So you know where you can put your lesson.

            • dragosmp
            • 7 years ago

            Agreed, Samsung F4EG were at similar levels and now they cost a bit more

            • Dposcorp
            • 7 years ago

            You are comparing a specific case of a certain low power, low speed drive, and trying to apply your flawed logic to ALL HARD DRIVES.

            You blanket statement IS INCORRECT, so you need to sell that somewhere else; I aint buying it.

            Like I said earlier, $ per GB is not the same for every size drive, every speed or every manufacture.

            All these other 2TB low power, low speed drives were also $69 back then, and are way more expensive now.

            [url<]http://camelegg.com/product/N82E16822148681?locale=US[/url<] [url<]http://camelegg.com/product/N82E16822152245?locale=US[/url<] [url<]http://camelegg.com/product/N82E16822136514?locale=US[/url<] So for those those particular drives, your statement holds. However, in the example I gave, that fast Hitachi drive is only $5 more then what it was before the flood, so again, your statement of a fixed cost per GB is not accurate, and you are still wrong! However, please feel free to grumble and complain while you continue buying your overpriced, slower drives, while the rest of us get this Hitachi. 🙂

    • Kraft75
    • 7 years ago

    I haven’t purchased a hard drive since the floods happened, and I’ll stick with SSDs for now until these companies want some of my money I guess!

    • Alexko
    • 7 years ago

    It’s really unfortunate that the mergers were allowed to happen. :-/

    • Antimatter
    • 7 years ago

    Let’s hope that some of the additional profit is used for increased R&D spend so in the long term prices might be lower than what they would otherwise have been.

      • Frith
      • 7 years ago

      We’re more likely to see slower development. Why spend money on R&D when you can keep selling your current products for a high price? As long as Seagate don’t release any new products then Western Digital don’t need to and visa versa.

      Both companies have had the capacity to make a four platter 4TB drive for over a year, yet neither has. Without competition things will likely continue like this, and we’ll be stuck with high prices and slow development.

      I’m a big believer in the free market, but the free market requires competition in order to work. The closer to a monopoly you get the more it fails. I personally believe mergers should be prevented once the number of players in a market drops below six.

      • mcnabney
      • 7 years ago

      In Seagate’s case the additional profit went straight to the shareholders through stock buyback and dividends.

      • LocalCitizen
      • 7 years ago

      SSD is a limited competition to Seagate and WD. $/GB for SSD is coming down fast. More and more people are switching.

    • JustAnEngineer
    • 7 years ago

    [quote=”Zhang”<]The concentration of market share has resulted in an oligarchy where the top players can control pricing and are able to keep [i<]prices[/i<] at a relatively high level.[/quote<] This, friends, is why it is [b<]okay[/b<] that there are over a dozen players in the SSD market. [url<]https://techreport.com/discussions.x/22850[/url<]

      • Chandalen
      • 7 years ago

      <cynicalbastard>A dozen for now. Give it 5-10 years and it’ll be down to 2 or 3.</cynicalbastard>

      • RickyTick
      • 7 years ago

      It’s a lot like gasoline prices in the US. It seemed logical when prices shot up due to Katrina. But they have never fallen back anywhere near those prices since, and never will.

        • mcnabney
        • 7 years ago

        Gasoline prices plummeted to under $2/gal at the pit of the recession.

          • OneArmedScissor
          • 7 years ago

          Down to $1.60 average, which means it was actually less in some places. I distinctly remember that being the case here.

          All gas is not created equal.

          Some areas still keep their prices to about $3, worst case scenario. It just depends on the type of oil the refineries in the area use. There are some key refineries which have been running losses in the billions of dollars for years now, which persists even while oil prices are up.

          This is nowhere as simple as most people like to act. There is no price of just “oil,” as there are many varietes, with drastically varying costs at every level, from extraction, transportation, refining, to geopolitical – and it’s that last one you need to worry about, not the bogeymen the news comes up with.

          • Austin
          • 7 years ago

          🙁 In the UK we’re paying nearly $8 per US gallon. £1.31 ($2.02) per litre is currently about the lowest price and there are 3.8 litres to a US gallon.

            • Ragnar Dan
            • 7 years ago

            Howdy, Austin. Been a while since I’ve noticed you around these parts.

            Anyway, is it not still the case that in the UK a large portion of the price of petrol is in taxes both VAT and a special tax to help pay for the National Health Service?

      • rrr
      • 7 years ago

      Over a dozen players, but a little less difference in actual hardware.

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