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Chief executive officer of Seagate Technology, the No. 2 maker of hard disk drives (HDDs) in the world, gave a dramatically negative prediction for the HDD industry. The recovery of the industry after tragic flooding in Thailand will take a year and limited supplies of hard drives will persist not only in the first half of next year, but throughout the whole calendar 2012.

“This is going to take a lot longer than people are assuming, until the end of 2012 at least. And by then, demand will have gone up,” said Stephen Luczo, chief executive officer and chairman or Seagate, in an interview with Bloomberg news-agency.

Many analysts currently expect the HDD industry to recover by the middle of 2012. Unfortunately, even high-ranking executives at large PC makers do not know the whole situation around the flooding in Thailand and exact consequences for manufacturing capacities of companies like Western Digital, Seagate or Toshiba. Moreover, hard drive makers have not yet released any rescue plans to their partners and public. Therefore, it is unknown whether they will need to rebuild their factories, acquire new equipment and install it or will just have to clean the things up and start production.

The industry as a whole at this point is concerned that with production capacities of many companies that produce hard drives, or components for them, halted, it will be impossible to get the storage devices at all. For example, Nidec, which controls 80% - 90% of the market of HDD motors, currently has two out of three of its Thailand factories operational and its output is generally unknown. Without motors and components for motors, it is unclear how many hard drives can be build even on Seagate's or WD's capacities outside the flooded areas.

According to Mr. Luczo, the main question is which PC companies get the drives as this will directly impact their market presence. For example, certain clients of Seagate suddenly desired to lock up some of Seagate’s capacity, even with the higher prices. Some have offered $250 million upfront, according to the executive.

“It’s going to be very interesting to see who gets drives and who doesn’t,” said Mr. Luczo.

The chief exec and chairman of Seagate admits that his company could raise prices 40%, but instead is offering 20% hikes to those who commit to one- to three-year contracts.

“People are going to appreciate the complexity of this business,” stressed the high-ranking exec.

Tags: Seagate, HDD, Business, Nidec, WD, Samsung, Toshiba

Discussion

Comments currently: 17
Discussion started: 11/17/11 03:57:47 PM
Latest comment: 11/21/11 06:43:53 AM
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1. 
To me this sounds like a bogus prediction to retain sky-high profit margins on HDs perhaps akin to blackmail?
2 0 [Posted by: beenthere  | Date: 11/17/11 03:57:47 PM]
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If it is, it won't work. Competition will always triumph.
1 0 [Posted by: qiqi1021  | Date: 11/17/11 04:51:50 PM]
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Well if all the HD drive makers raise their prices, which typically happens in most instances, then consumers lose. Industry cartels, aka cabals, extort consumer. See the oil industry, insurance companies, utility companies, banks, etc.
1 0 [Posted by: beenthere  | Date: 11/18/11 07:00:44 AM]
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Kiddo, what competition. WDC and Seagate eat up all the market, and Toshiba always keep their prices high and affordability very low. And afaik they dont even produce 3.5" consumer hdds for years now
0 0 [Posted by: OmegaHuman  | Date: 11/19/11 08:53:38 PM]
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Of course it's bogus. The whole story about floood is in fact thrifty planned because many of "prosperous HDD makers" (namely Seagate) do not invest into technology for years. They milking money ox by releasing their already slow platter advancements by being only first in marketing slides pushing namely by being first in presenting sata3 (or sata2 in past) while only nowadays HDDs speed become limited by 150MBps transfers of old SATA(1)
And WDC which has been pushing tech further is somewhat cunningly flooded and went out-of-order in same year when Seagate reconstructed itself by being private holding and after it eat up Samsung facilities just to reach No.1 in paper positions on global market.

There's much shennanigans out there and probably real thing is have only faintest connections with some flood in far away land. After all monsoon season cames twice a yeare in those areas so it's not like it couldnt be planned. Prices of larger HDDs simply become very attractive to customers while stocks of old smaller drives produced in last two years just piled up .... and even crap need to have some kind of sale.
1 0 [Posted by: OmegaHuman  | Date: 11/19/11 08:50:41 PM]
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2. 
This is crap. They are loving all these extra profits and seem to want to continue them, and they are using this as an excuse to keep the prices inflated.
2 0 [Posted by: iLLz  | Date: 11/17/11 05:51:18 PM]
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ofc, they love milking the ox while it lasts :madrofl:
The problem is that crappy courts killing rambus just because they're small and innovative while old crappy greaseball reptiles like seagate will never end up in court for shabby business practices .... because they're well connected company sharing profit with lobbyists. It's the bussiness way. You know the old danish adage "When money talks bullshit walks"
0 0 [Posted by: OmegaHuman  | Date: 11/19/11 09:01:14 PM]
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3. 
And of course the price will go up and this CEO doesn't like this at all......
He could actually say: we will raise prices. Simple like that. I dont really think he felt the need to explain, did that like a smoke screen lol.
0 0 [Posted by: george1976  | Date: 11/18/11 05:19:28 AM]
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4. 
Tsch... Sure they want to profit, but what you dont seem to understand is that the production problems are very real.

Much depends on how well the supply chains for parts recover, and that is still completely uncertain.
The Seagate CEO in his above statement may very well be far too optimistic.
0 0 [Posted by: DIREWOLF75  | Date: 11/18/11 09:47:22 AM]
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I am sure that the production problems to exist, I don't think it is as bad as they say and for the prices to inflate so much. I keep reading stories about other manufactures getting their plants back up and running and these are manufactures for HDD motors and they produce 90% of the worlds supply. They seam to think by early next year things will normalize, but them you get these guys (Seagate) who just magically think prices will be high until end of next year, makes you think.
1 0 [Posted by: iLLz  | Date: 11/18/11 11:15:42 AM]
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That WAS the original prediction - back to normal in 3-6 months. Now that the HD suppliers see what a captive market they have, all of a sudden now it's 12 months before things get back to normal. That's a lot of exploitation IMO.

The real fix is for consumers to simply stop buying HDs. Then prices will come back to reality.
1 0 [Posted by: beenthere  | Date: 11/18/11 11:47:00 AM]
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That's why I am not buying my extra external HDD right now.
1 0 [Posted by: Zingam  | Date: 11/19/11 09:38:50 AM]
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5. 
Now's a great time to get that SSD upgrade.

1 0 [Posted by: jihadjoe  | Date: 11/19/11 11:34:26 AM]
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woooooow, sssssd it's almost like cccp but the latter was at least less evil no matter what some have to say about it
1 0 [Posted by: OmegaHuman  | Date: 11/19/11 09:03:35 PM]
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A large scale switch to SSD's might be the true effect of this. A lot more PC manufacturers will start sticking SSD's in their new PC's not HD's as they were really only using HD's because they were cheap.

With rising HD prices and falling SSD prices, combined with the fact that SSD's are so much quicker and hence a good selling point then by the end of 2012 most PC's might ship with them not traditional HD's.
0 0 [Posted by: Dribble  | Date: 11/21/11 06:43:53 AM]
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6. 
This is inexcusable - the price gouging, locating so much infrastructure in one geo, the duration of the anticipated shortfall, etc. Lotsa heads should roll.
1 0 [Posted by: mcunix  | Date: 11/19/11 04:08:08 PM]
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7. 
I would not be surprised if this continues into 2013 and beyond. It is like blood in the water with these higher prices and once they have gotten used to charging people this way it will take a long time before coming back to sanity.
0 0 [Posted by: nforce4max  | Date: 11/21/11 06:10:07 AM]
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