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Hard disk drive (HDD) supplies in the first quarter commenced their recovery from the disastrous floods that struck Thailand in late 2011; still, a full recovery of production is still months away, with unit shipments not expected to return to annual growth until the third quarter, according to IHS iSuppli research firm.

“The recovery of global HDD manufacturing has begun and will continue during each quarter of 2012,” noted Fang Zhang, storage analyst for IHS.

Due to production disruptions at HDD suppliers and at component makers, global hard drive shipments in the fourth quarter of 2011 fell by 26% compared to the same period in 2010. Shipments are set to decline by another 13% in the first quarter and by 5% in the second quarter on an annual basis.

The global HDD market won’t return to year-over-year growth until the third quarter, when shipments rise by 2%, followed by a 49% surge in the fourth quarter as the industry snaps back from the previous shortage, according to analysts, which corresponds to plans of both Seagate and Western Digital.

On a sequential basis, shipments in the first quarter are expected to increase by 13%, a dramatic turnaround from a 29% plunge in the fourth quarter of 2011. Shipments are expected to continue to grow by 14% sequentially in the second quarter, by 11% in the third quarter and by 4% in the fourth quarter.

 “The recovery will be prolonged for at least two more quarters, as supply constraints keep unit shipments from climbing on an annual basis until third quarter. Meanwhile, HDD prices will remain inflated and inventories will continue to be depleted, showing that demand is exceeding supply. Supply and demand should return to balance by the end of the third quarter,” added Mr. Zhang.

Major HDD suppliers have shifted some production to locations outside of Thailand, which has helped ease the shortage situation. At the same time, some of the major HDD component suppliers have resumed a portion of their production in the country and have migrated manufacturing operations to other regions.

Western Digital Corp. (WDC), the HDD manufacturer most impacted by the floods, has increased manufacturing in other countries, and is expected to return to full production by Q3 2012. Toshiba Corp., which also was hit hard by the disaster, has boosted its production in other countries as well.

However, given the magnitude of the disaster, these moves have been insufficient to make up for the shortfall in production so far. In anticipation of supply constraints, the global average selling price (ASP) for HDDs soared by 28% in the fourth quarter. While prices will decline by 3% in the first quarter and by 9% in the second quarter, they will remain inflated above 2011 levels throughout 2012.

“Prices will remain high for a number of reasons, including the higher costs associated with the relocation of production, as well as higher component costs because of flooding impacts among component makers. Furthermore, PC brands have signed annual contacts with HDD makers that have locked them into elevated pricing deals for the rest of the year,” said Mr. Zhang.

Given the two megamergers between Seagate/Samsung and WDC/Hitachi GST, IHS expects the HDD industry could hold prices higher than pre-flood levels for a few more quarters because there are fewer competitors in the market.

Tags: HDD, Western Digital, Seagate, Toshiba, Business

Discussion

Comments currently: 9
Discussion started: 02/15/12 06:50:20 AM
Latest comment: 02/19/12 07:46:19 PM
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[1-4]

1. 
Keep duping the public for windfall profits on over-priced HDDs. What goes around may eventually come around...
1 2 [Posted by: beenthere  | Date: 02/15/12 06:50:20 AM]
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2. 
This doesn't explain why 1 TB HDD price fell from $160 average to $110 in Ukraine for more than 2 months, while in US, where prices are always at least 20% lower, same 1 TB model still cost $160.

This shows that such companies as newegg right now are buying them for ~$80 at most and making shitload of revenue on naive customers.
0 0 [Posted by: PsiAmp  | Date: 02/15/12 01:33:28 PM]
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- collapse thread

 
I doubt NewEgg is the source of the price gouging.

If all of the U.S. e-tailers are selling at the higher prices - as they seem to be, it's because the HD mfgs. are charging them more. It's possible the prices in the Ukraine have not increased because they know sales would tank? The U.S. is a huge market with great demand.

As we see some people will pay the inflated prices...resulting in great profits for the HDD makers.
0 2 [Posted by: beenthere  | Date: 02/15/12 02:46:22 PM]
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Its the weakness of the US $. Countries in the North Atlantic zone are having shrinking economies and have run deficits. People and countries can't borrow money to get out of debt or print more money. Pay tax and run surpluses. e,g China, India & most Asian countries except Japan.
The price of goods also depend on turn-over. It looks like the USA etc are having the chickens coming home to roost. Bad business practices from major US co.'s who moved their operation and manufacturing to other countries.
0 0 [Posted by: tedstoy  | Date: 02/15/12 03:19:24 PM]
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As I said they did increase to >$160 levels for 1 TB. It is only after 2 months, they got to ~$110 levels. As prices keep fluctuating you can find 1 TB for $100 time to time.

HDD manufacturers stated they are increasing prices to 20-30%. It is that re/e-taliers who increased the price so much. And why not as there is a huge number of news articles on the net saying there's a deficit making a perfect explanation for any price increase they want?

And they will keep that price as long as 200% profit covers 20% less demand. On top of that you can get rid of crappy HDDs, that no one bought before.

Keep thinking newegg and others has a fair price policy.
0 0 [Posted by: PsiAmp  | Date: 02/16/12 12:41:11 AM]
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Just dont buy when its overpriced. Computer Equipment especially goes down in price as time goes by and it usually takes longer than a couple quarters....

1TB is the past. I've had a 1TB Harddrive for quite some time already. 2TB is the new 1TB. Wont be long until 2TB is in the 100 zone price.
0 0 [Posted by: campdude  | Date: 02/19/12 05:23:19 PM]
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3. 
hope prices get better too
0 1 [Posted by: madooo12  | Date: 02/16/12 09:06:45 AM]
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4. 
Greed is good.............or so they say, but I have a very long memory, and I dont forgive the BILLIONS being made out of this disaster
0 0 [Posted by: alpha0ne  | Date: 02/19/12 07:46:19 PM]
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