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Hard drive pricing high through 2014, claims analyst

Hard drive pricing high through 2014, claims analyst

Hard drive prices are expected to remain elevated until the end of 2014, a report from Coughlin Associates claims.

An investigation into the hard drive industry suggests that, while it is recovering from the flooding in Thailand that shut down much of its production capabilities, prices will remain inflated for the next two or three years.

Although companies are reporting that production will be back on track towards the end of this year, with Western Digital predicting a September return to normalcy, the impact of the floods is likely to be felt for quite some time. The most enthusiastic estimates suggest that pricing will be back on track towards the end of the year, but a new report casts doubt on that prediction.

According to US-based Coughlin Associates, hard drive prices will remain inflated throughout 2014 as a direct result of the Thai floods. This is despite predictions that supplies will return to normal before the year is out.

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.

If that's the case, Coughlin's timeline doesn't look too unlikely. As a result of the flooding, Western Digital reported charges and expenses of $199 million with net income of just $145 million. As a result, it will take a year of greatly improved sales simply to earn back the money it has lost.

The news that the hard drive industry is recovering is welcome, of course, but it's certainly sounding like buyers can expect to be waiting a while for prices to drop down to pre-flood levels.

25 Comments

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longweight 14th February 2012, 12:38 Quote
No great suprise really! Sad that I didn't buy some extra HDD's last year but hey-ho, you can't win them all!
thetrashcanman 14th February 2012, 12:43 Quote
Oh well looks like I better buy 4 x 240Gb SSD's
mighty_pirate 14th February 2012, 13:16 Quote
No reason I can see that it won't be a little of both. Prices are already falling. I can believe that they won't reach their previous low until 2014/15, but also that they'll still be a lot more reasonable by 2013. As soon as I can get a 3tb for about £100 I'm happy.
neocleous 14th February 2012, 13:38 Quote
Were these factories not insured?
SchizoFrog 14th February 2012, 13:40 Quote
For more reasons than just the inflated HDD prices but let's hope they don't have another flood in the mean time.
MjFrosty 14th February 2012, 13:44 Quote
The tragedy was quite obviously God's way of telling the industry to move on and leave the mechanical HDD behind.
maverik-sg1 14th February 2012, 14:11 Quote
This is not as correct as people may think - epitomises the way the world hangs on an anlysts reporting prowess.

The HDD supply chain will of fully recovered (subject to not further natural disasters) by September this year, this includes clering oustanding backlogs and being at or above capacity to supply to current demands.

Assuming that goal is achieved, Q4 2012 should see prices staibilising and dropping accordinfly.... a little earlier than the 2014 predictions we see here.
GoodBytes 14th February 2012, 14:35 Quote
Actually I have notice HDD's prices going down. It's still expensive.. but lower than before.
brutos 14th February 2012, 14:37 Quote
This analyst fail to mention that most people will refuse to buy at those high prices which in turn will hurt the manufactures anyway.
Where as lowering prices back to pre-flood levels will stimulate sales faster thus recovering loss revenue quicker...the longer they keep prices inflated the harder it will be to recover lost revenue.

I guarantee that if they reduce prices back to what they were £50 to $60 for 2TB, they would sell triple what they are now with the inflated prices.
Mister_Tad 14th February 2012, 14:44 Quote
Quote:
Originally Posted by maverik-sg1
This is not as correct as people may think - opitimises the way the world hangs on an anlysts reporting prowess.

The HDD supply chain will of fully recovered (subject to not further natural disasters) by September this year, this includes clering oustanding backlogs and being at or above capacity to supply to current demands.

Assuming that goal is achieved, Q4 2012 should see prices staibilising and dropping accordinfly.... a little earlier than the 2014 predictions we see here.

Your first sentence really confused me until I realised you meant "epitomises"... I read it as "optimises"

</pedant>

But in complete agreement here - more of this "Oh Gartner/IDC/etc say it's true so it must be", they are predictions - educated and informed predictions, but predictions none the less, like BBC telling you it's going to rain tomorrow.
Sarakon 14th February 2012, 15:04 Quote
Quote:
Originally Posted by Mister_Tad
[...] like BBC telling you it's going to rain tomorrow.
I like that comparison...
maverik-sg1 14th February 2012, 15:50 Quote
@ Mister_Tad - yeps I messed up on the grammar, and because I posted on the site not the forum, I was unable to edit it - thanks for the correction, the assumption of which was correct.
bulldogjeff 14th February 2012, 16:00 Quote
Quote:
Originally Posted by brutos
This analyst fail to mention that most people will refuse to buy at those high prices which in turn will hurt the manufactures anyway.
Where as lowering prices back to pre-flood levels will stimulate sales faster thus recovering loss revenue quicker...the longer they keep prices inflated the harder it will be to recover lost revenue.

I guarantee that if they reduce prices back to what they were £50 to $60 for 2TB, they would sell triple what they are now with the inflated prices.

I tend to agree with this, because people are going to stick with what they've go and not buy unless they have to. then the warehouses end up stocked to the roof and selling nothing so prices will drop again. maybe not as cheap as before, but some where close to it.
Sloth 14th February 2012, 16:08 Quote
Quote:
Originally Posted by neocleous
Were these factories not insured?
Probably for their value as real property. That'll cover replacement costs, but it won't cover lost profit from the factory being offline.
Quote:
Originally Posted by GoodBytes
Actually I have notice HDD's prices going down. It's still expensive.. but lower than before.
Same, there are even some good sales if you look for them. The big difference between predictions on hard drive prices seems to be that some are predicting when they'll start dropping (such as now, when supply chains are getting back to normal) and when prices will hit the levels they were at pre-flood which could very well be awhile longer.
Mister_Tad 14th February 2012, 18:03 Quote
Quote:
Originally Posted by maverik-sg1
@ Mister_Tad - yeps I messed up on the grammar, and because I posted on the site not the forum, I was unable to edit it - thanks for the correction, the assumption of which was correct.

Fixt! :D
Gradius 14th February 2012, 18:25 Quote
What? Paying high? No way! Will buy NOTHING!
psychoti 14th February 2012, 18:53 Quote
Its all about marketing!
pizan 14th February 2012, 21:32 Quote
Nice job giving them the idea to keep the prices high.
Woollster00 14th February 2012, 22:09 Quote
How stupid by 2014/2015 ssds will be way cheaper than £1 per gb.
supermonkey 14th February 2012, 22:25 Quote
Bummer. I was looking for a new HDD the other day because the external drive I use for my primary back-up is full. I was going to pick up a new 1TB drive, but when I saw the current prices I decided to put it off until they came back down.

Looks like I'll be waiting for a while. I'll just have to live with the secondary NAS back-up until then. Of course, this will only complicate things by having non-identical back-ups, but I suppose that's an acceptable risk for now.
Kruelnesws 14th February 2012, 23:58 Quote
Prices aren't fantastic here but I can get a seagate 3TB Barracuda 7200rpm SATA III w/ 64MB Cache hard drive for $230 CAD. Much more reasonable than not too long ago. Most places weren't selling hard drives bigger than 2TB and they were more than that. Still going to wait though.
mclean007 15th February 2012, 06:44 Quote
Quote:
Originally Posted by brutos
This analyst fail to mention that most people will refuse to buy at those high prices which in turn will hurt the manufactures anyway.
Where as lowering prices back to pre-flood levels will stimulate sales faster thus recovering loss revenue quicker...the longer they keep prices inflated the harder it will be to recover lost revenue.

I guarantee that if they reduce prices back to what they were £50 to $60 for 2TB, they would sell triple what they are now with the inflated prices.
I guarantee you are wrong. They might sell triple or even ten times the number units to tech enthusiasts in elective upgrades, but that won't even move the needle on total drive sales.
Quote:
Originally Posted by bulldogjeff
I tend to agree with this, because people are going to stick with what they've go and not buy unless they have to. then the warehouses end up stocked to the roof and selling nothing so prices will drop again. maybe not as cheap as before, but some where close to it.
You're both making the mistake of thinking like computer enthusiasts. What proportion of HDD sales do you really think are driven by geeks like us going "oh I really would like to upgrade my 1TB drive to a pair of 2TB drives in a RAID0 stripe"? I don't know the figures, but I'm going to bet it is so insignificant as to be discounted as a rounding error. The *vast* majority of drive sales are to:

* corporates, data centres etc., who have an actual business need for drives of a given spec, and are unlikely just to be able to wait it out until drive prices soften to a level they like. Do you think Google and Facebook are going to stop building servers until HDD prices drop? Similarly, do you think Sony and Microsoft are going to stop making PS3s and Xbox 360s until the price of the drives inside them comes back down?

* new build systems, in which case the increased drive cost will make a real but small difference to overall system cost, but unlikely to be enough that average joe consumer will notice. Do you think the average man on the street could even identify a HDD inside a computer and tell you its functions ("it's the computer's memory, innit?"), let alone tell you what the market price of (say) a 2TB drive is now vs 12 months ago?!

* replacing broken drives, in which case most people (even those aware that prices have risen, which is by no means a majority) would suck up a slightly higher drive price (which, to be fair, is still a small fraction of overall component cost) rather than not have a working system. I know I would.

Anyway, the whole POINT of the drive price increases was the floods constricted supply - there weren't enough drives to go round, never mind "tripling" the volume, so prices went up.

It is simple supply and demand economics. There is no great conspiracy to fleece consumers on drive prices. Market forces brought prices down in a sustained fashion; an unexpected natural disaster broke the supply chain so market forces pushed prices back up; and now, over time, market forces will bring prices back down again.
jodah175 16th February 2012, 21:21 Quote
Honestly, prices are much better than they were even a month/2 months ago. I bought a WD 2tb green drive the end of Jan 2011, for $90. It's now selling for $130. I can tolerate that. But it was going for well over $180 the few months after the floods. That is beyond ridiculous. Especially considering at that point, most stores were selling drives they had purchased at the pre-flood price.

BUt not back down to those prices before the end of 2014? I doubt that a lot.
stoff3r 20th February 2012, 19:39 Quote
Our store orders drives from alternative manufacturers like HP (allthough i suspect WD is the real manufacturer of atleast some of their drives), and prices are allready falling to reasonable levels, atleast for external drives. The difference being that we see the reinassance of smaller drives like 320GB, albeit at a smaller formfactor than before.

I suspect that prices are back to "OK" for 2tb units within 3-6 months.
The_Beast 20th February 2012, 19:42 Quote
Price still suck so I'll just turn my backup drives in to main drives for the non-essential data I do have backed up
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