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The worst is yet to come for the HDD industry

Massive flooding ravaged Thailand late last year. The problem for storage vendors such as Seagate and Western Digital was that much of the hard drive production that supplies the computer technology world is done in Thailand. The flooding meant many employees were unable to get to work, and many factories were damaged by high water significantly impacting production.
 
Analysts predicted the computer industry wouldn't see the worst of the storage shortages until this year. Seagate has confirmed that the analysts were in fact correct. Seagate is saying that its shortage of hard disk drives will continue throughout 2012 and supply will continue to fall short of demand, pushing prices up across the technology industry.
 
Seagate notes that in 2012 it expects a HDD shortage of about 150 million units. Those estimates are in line with analysts' predictions. Seagate competitor Western Digital has also announced that it doesn't expect HDD production to reach the same levels as before the flood until the third quarter of 2012. Estimates claim the industry was only able to ship 119 million HDD units in the quarter that ended December 2011, while demand was for 175 million units.
 
Seagate was able to ship 47 million units in the quarter ending December 2011, a decline of 4% from the same quarter in 2010. The decline in shipments was blamed on a shortage of components.
 
The major HDD manufacturers including Seagate and Western Digital have shifted as much production to unaffected facilities in other countries as possible. Other than facing damage to their own facilities HDD makers are also facing component shortages since many manufacturers that the major HDD suppliers rely on are also unable to produce components. Seagate plans to hold an auction for about 200,000 storage drives later this week to gauge demand.
 
Late last year, Seagate announced that it was cutting back on the standard warranty for a number of its hard drive families. Not surprisingly, Western Digital soon followed up with its own cuts.

Source: Computerworld



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4% Decline in shipments for Seagate
By FS on 2/2/2012 10:53:48 AM , Rating: 5
while doubling or tripling the revenue. Alright, so tell me why would they increase the supplies and start selling 2TB HDD's for less than $70, when they have no problem selling the same for over $150 now while only shipping 4% less. Even if they ship 10% - 20% less in the upcoming months, they have a far greater chance to increase their profits with the current prices than meeting the demand and selling them at ridiculously low prices.




RE: 4% Decline in shipments for Seagate
By XZerg on 2/2/2012 11:03:27 AM , Rating: 2
Ditto.

This would be more like underhanded price fixing by the HDD cartel that has been losing money for a while. Here's to looking forward for other storage means to pickup the slack and give these HDD cartels the finger.

Funny enough HDD cartels now are like the oil cartels - one incident and they pump up the prices and then get greedy looking at all the profits that they keep the prices up. SSD is like the Electric cars in that analogy. Corporate greed just sucks for the people.


RE: 4% Decline in shipments for Seagate
By tigz1218 on 2/2/2012 11:22:40 AM , Rating: 3
I'm not so sure if it's corporate greed or just common sense. If I owned a bakery and everyone loved my cake and was buying it for 10$ and I raised the prices to 20$ and everyone was still buying the cake why not? When customers stop buying my cake then I would realized I reached a certain threshold and will lower them until I find the maximum amount to charge and keep the customers rolling in.

The best way to bring prices down is to do precisely what you said, stop purchasing the item. A company looks out for its own best interest and having prices so high where no one buys them is not in their best interest.


By Ticholo on 2/2/2012 11:26:26 AM , Rating: 3
Until they come crying back to mommy, saying the mean kids aren't buying their stuff and so they'll have to lay-off some people or maybe ask for government help.
Not that there's anything wrong with what you said, but you just know they'll try to maximize profit that way before they bring prices down.
And really, like you say, why not? That way they can sell their cake and eat it too!


RE: 4% Decline in shipments for Seagate
By Ticholo on 2/2/2012 11:23:01 AM , Rating: 2
It gets even worse when you have less and less companies on the HDD industry.


By jak3676 on 2/2/2012 11:40:58 AM , Rating: 3
Good thing 120-256 GB SSDs are getting better and cheaper. I'll be holding on my old disk based drives for a while I guess, but makeing them storage only. Upgrading the OS/application drives to SSD's has been a nice improvment in those systems.


RE: 4% Decline in shipments for Seagate
By Mitch101 on 2/2/2012 12:11:31 PM , Rating: 2
Just like the Video Card and x86 CPU industry. True but I smell price fixing but understandably why.

It wasnt long ago that Seagate let slip they have 5tb hard drives coming (1tb platters). I think the Samsung purchase is where they got the tech to achieve this.

Not everyone can fill 5tb drives and if they come out at the way hard drive prices were going lets say $199.00 launch and 4 months later newegg sale $129.00 they ultimately know they will be selling less and less hard drives because they will take 2.5 times longer to fill up than the popular 2tb drives. Im sure they see a slowing in the consumer market since 2tb hard drives arrived.

In order to make 1tb platters they most likely would have had to retool the factory to a degree anyhow. Sure the flood cost them some money and is a valid excuse to raise prices to recoup that loss. But PC sales on a coporate level they would recoup the loss quickly and since PC sales didnt go through a significant drop the company is probably enjoying some nice profits keeping the price high. You go into business to make money and for the first time they are probably raking in a lot more than usual. I can see them using any excuse possible to reap high profit lines.

Sure I would like a 5tb $129.00 hard drive tommorow but Im sure I can clean out some disc space for a while and I just bought a BLU-RAY burner. Blu-Ray media at 25gb for less than a buck a disc will be the way to go until hard drive prices are competitive again.

I still have 1.5-2.0 years warranty on most of my drives which if one fails I get a replacement and thats beyond the date of the hard drive companies crying that prices will remain high until.

I can get 625gb of BLU-RAY media for $20.00. Pack of 25 each 25gb I think I will be fine.

Im living on Hard Drive Warranty's and BLU-RAY burns for a while.


RE: 4% Decline in shipments for Seagate
By justniz on 2/2/2012 1:13:05 PM , Rating: 2
5TB drives $199 at launch then $129 4 months later?
What are you smoking?
The Hitachi 4TB drive has been out over a year and is currently $399 on newegg.
Price per TB would suggest the 5TB drive will be at least $500, then I'd expect the usual ripoff premium applied because its the largest.
You should expect to pay around $700 for a 5TB drive for at least a year.


RE: 4% Decline in shipments for Seagate
By Solandri on 2/2/2012 2:52:50 PM , Rating: 2
The "ripoff premium" as you call it is the surcharge needed to pay for the additional R&D costs incurred while figuring out how to squeeze an extra 1 TB of storage into a drive the same physical size as the 4 TB drive.

Would you prefer it if they spread this cost out over their entire product line? So people buying smaller drives end up subsidizing the corporations and porn hoarders buying 5 TB HDDs?


By stardude692001 on 2/3/2012 12:08:53 PM , Rating: 2
Hey when ACTA or SOPA or PIPA or some other alphabet soup law kills the internet I want to sitting on enough poor anime and movies to last me till the end of the culture war.


RE: 4% Decline in shipments for Seagate
By Mitch101 on 2/2/2012 3:25:48 PM , Rating: 2
You missed my comment on how drive prices were going before the flood. I got my 2TB for $70.00 so $199 launch for 5TB wouldn't be too far off.


By Cheesew1z69 on 2/3/2012 9:39:54 PM , Rating: 2
And that drive was probably closer to 300 at launch....


RE: 4% Decline in shipments for Seagate
By Ticholo on 2/2/2012 1:30:19 PM , Rating: 2
You're right, but they could just have released those 5TB+ HDDs at a premium if they weren't as sought after. I still may want to buy a 1TB HDD for a reasonable price. I'm sure that Seagate would rather you spend your BD money on their HDDs.

I don't dislike them for wanting to make more money. I just don't think that given the positions they took, purchasing competitors (that were on their way out, fair enough), they should take this opportunity to gouge people with 100% or more increases in price.


By Mitch101 on 2/2/2012 3:28:59 PM , Rating: 2
All Im saying is burn what you can to BLU-RAY disc's until the hard drive prices come down.


By cubby1223 on 2/3/2012 2:50:38 AM , Rating: 2
Why don't you do the world a favor and just admit you don't know s**t about business.

Seagate shipped 4% less drives from a year ago, while demand increased x% and their added business expenses due to damaged facilities soared y%.


Con job of the sheep
By Beenthere on 2/2/2012 12:27:26 PM , Rating: 2
HDD makers have fleeced consumers good the last few months with drastically inflated prices - as their quarterly financial results show. If you want to see HDD prices drop like a rock back to reality - stop buying HDDs. Otherwise the HDD makers will use the same Biz model as the oil Cartel and rape all consumers.




RE: Con job of the sheep
By Cheesew1z69 on 2/2/12, Rating: 0
RE: Con job of the sheep
By EasyC on 2/2/2012 1:01:56 PM , Rating: 3
I guess you didn't read that they only had a 4% hit to shipments, meanwhile a hard drive that cost 80$ a couple months ago, is now 170$. Seems like a bit more than 4%.

I'm sorry Seagate, my heart goes out to the families affected by the flooding. I hope the repairing has went well. But your product isn't as vital like oil. I will not pay enormous markups just because the execs see a sudden excuse to raise prices.

The interesting part is SSD pricing isn't affected by it (nor should it be).


RE: Con job of the sheep
By geddarkstorm on 2/2/2012 1:09:50 PM , Rating: 2
Pretty good for the SSD market, as now their relative value has gone up.


RE: Con job of the sheep
By Cheesew1z69 on 2/2/2012 1:22:36 PM , Rating: 2
I read it, don't worry about me, they still couldn't meet the demand, period. That's the problem. Not sure what about that there isn't to understand. It seems pretty simple.


RE: Con job of the sheep
By Solandri on 2/2/2012 2:45:47 PM , Rating: 5
quote:
I guess you didn't read that they only had a 4% hit to shipments, meanwhile a hard drive that cost 80$ a couple months ago, is now 170$. Seems like a bit more than 4%.

Pricing has nothing to do with manufacturing costs (other than providing a floor which sellers typically are not willing to cross). It has to do with supply and demand.

e.g. Seagate sells 100 million HDDs at $80 each. A 4% drop in shipments causes them to only have 96 million HDDs. If 100 million people decide they need HDDs, obviously there aren't enough for all of them. A bidding war ensues, and the price goes up.

The 4% change is not the amount that the price goes up. It's the percentage of buyers who have to drop out of the bidding for the price to stabilize. i.e. the highest amount that the bottom 4 million customers (4%) are willing to pay determines the new market price for HDDs. If the 4 millionth customer would've paid a max of $169.99, then than means that a $170 price assures there are only 96 million customers for the 96 million HDDs, and the price is stable.

(And before anyone rants about how unfair this is, the same process happens in reverse when there's oversupply. With sellers "bidding" the price down to try to sell their inventory ahead of their competitors to a limited number of buyers. That scenario is actually much more common in the HDD market. It's so heavily commoditized with razor thin margins that the $80 price was very close to the manufacturing cost of the drive.)


RE: Con job of the sheep
By NihilistZerO on 2/2/2012 7:16:22 PM , Rating: 2
Always nice to read a post from someone who understands capitalism and markets :-) Thumbs up!


RE: Con job of the sheep
By mindless1 on 2/4/2012 8:05:11 PM , Rating: 2
You have described an overgeneralized principle, one that does not apply to this HDD situation. Even a mere 30% price increase will cause more than 4% reduction in demand, though that reduction also includes buyers opting for a lower capacity drive to stay near the same price point and/or not increasing capacity on the same schedule they otherwise would've (referring to OEMs).


RE: Con job of the sheep
By cubby1223 on 2/3/2012 2:52:45 AM , Rating: 2
quote:
I guess you didn't read that they only had a 4% hit to shipments


And I guess you fail to comprehend that this was a 4% decline in shipments from a year ago. NOT a 4% decline in shipments compared to where they would have been today without flooding.


Better quality needed
By VFog on 2/2/2012 11:19:18 AM , Rating: 3
If Seagate would actually create hard drives that would last longer than 12 months, there wouldn't be any shortage at all.




RE: Better quality needed
By Golgatha on 2/2/2012 11:45:25 AM , Rating: 2
RE: Better quality needed
By A11 on 2/2/2012 5:39:46 PM , Rating: 2
I've never had a Seagate drive crash on me and I've used them for well over 15 years but yea YMMW.


RE: Better quality needed
By priusone on 2/4/2012 12:32:30 PM , Rating: 2
I had 2 1.5tb Seagate Xtremes die on me within a year of their purchase. The 1st replacement just died last month and the second one is now starting to corrupt the files stored on it. These drives are attached to media servers, in a private residence, they stay relatively cool, and only serve up one file at a time. Believe me, I understand why Seagate cut the warranties down to 12 months.


Nooo!!!
By Joz on 2/2/2012 12:01:46 PM , Rating: 3
Now how will I store all my porn if I can't afford or find harddrives!!

NOOOOOO!!!




RE: Nooo!!!
By mattclary on 2/2/2012 12:31:24 PM , Rating: 2
If you're storing your porn, you're doing it wrong. ;)


really?
By brug on 2/2/2012 12:04:48 PM , Rating: 3
Are you people for real? This is a perfect example of supply and demand. Supply goes down, demand remains steady (or increases), prices rise. The drive vendors did not purposefully flood their factories or those of their key suppliers. This was a major humanitarian catastrophe in Thailand that was really not covered by the US media, which is a shame because it was much more of a disaster than the Turkey earthquakes that were all over the news.




.
By StevoLincolnite on 2/2/2012 10:59:22 AM , Rating: 2
Well that sucks. :(
Hopefully my drives last till the end of the year... Both space and reliability wise.




Don't wait
By Jeremy87 on 2/2/2012 11:12:54 AM , Rating: 2
They just don't want people to wait until a much-sooner-than-end-of-2012 date when the prices start to fall.




Shortage?
By bug77 on 2/2/2012 12:26:31 PM , Rating: 2
Curiously, I don't know anyone that wanted to buy a HDD and couldn't find one. Retailers don't seem to be out of stock at all.




By Roy2001 on 2/2/2012 4:22:57 PM , Rating: 2
Perfect flood to bump up and lock HD price.




The market is comical
By Iketh on 2/4/2012 12:51:10 AM , Rating: 2
I bought a WD 2TB a few days ago when I told myself I'd never buy during these price hikes because it came out to $100 when purchased in a combo at Newegg. That's my threshold. These drives that are like $200 for 2TB because they're 7200rpm are laughable. SSD FTW




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