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Although production of hard disk drives (HDDs) is rapidly recovering from the catastrophic Thailand floods that occurred in October, HDD average selling prices (ASPs) are not expected to decline to pre-disaster levels until 2014, according to an IHS iSuppli. The two main reasons to keep pricing of hard drives at high levels are consolidation on the market of HDDs as well as long-term supply agreements between suppliers and clients.

Average Selling Price of HDD to Remain on $60+ Level

In the wake of the floods, the ASP for the entire HDD market soared to $66 in the fourth quarter of 2011, up 28% from $51 in the third quarter. The ASP held steady at $66 in the first quarter, and is expected to decline marginally to $65 in the second quarter. Apparently, the prices will remain on those levels for years to come.

Meanwhile, after flooding caused a 29% plunge in shipments in the Q4 2011, HDD production is rising and will recover completely by the third quarter. Shipments rose by 18% to 145 million in the Q1 2012 and by 10% to 159 million in the Q2 2012. In the third quarter of 2012, shipments are expected to rise by another 10% to 176 million. This will mark the first time in 2012 that shipments will exceed their 2011 quarterly levels, up from 173 million in the Q3 2011. Despite exceeding pre-flood shipment levels in the third quarter, pricing is expected to remain inflated.

“HDD manufacturers now have greater pricing power than they did in 2011, allowing them to keep ASPs steady. With the two mega-mergers between Seagate/Samsung and Western Digital/Hitachi GST, the two top suppliers held 85% of HDD market share in the first quarter 2012. This was up from 62% 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,” said Fang Zhang, analyst for storage systems at IHS.

Long-Term Supply Agreements Drive Pricing Upwards

Owing to concerns over HDD availability, an increasing number of PC original equipment manufacturers (OEMs) in the second quarter have signed long-term agreements (LTAs) with HDD makers. These LTAs provide shipment guarantees, but lock in pricing that is approximately 20% higher than pre-flood levels.

Even if all the OEMs stop entering into LTAs by the end of 2012, it would take about four quarters with a 6% sequential decline in the HDD ASP to reach the pre-flood pricing level. However, given that there have been no consecutive 6% sequential quarterly declines during the past three years, the likelihood is remote that this would happen now and that HDD pricing will decline accordingly. 

Demand for Hard Drives Continues to Grow

Beyond the supply-side factors, demand-related issues also will contribute to inflated HDD pricing throughout 2012 and 2013. From local drives for media content, to cloud storage of social media and corporate data, the requirement for large quantities of HDD capacity continues to increase.

Meanwhile, PC sales are also projected to climb in 2012. Growth will be driven by the rising adoption of Intel Corp.’s latest Core i-series "Ivy Bridge" microprocessor, the surging sales of ultrabooks in the second half of the year and the proliferation of Microsoft Corp.’s new Windows 8 operating system.

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

Discussion

Comments currently: 15
Discussion started: 06/07/12 08:52:01 AM
Latest comment: 06/08/12 04:27:34 PM
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1. 
FUCK ME ... that's my comment.
2 2 [Posted by: medo  | Date: 06/07/12 08:52:01 AM]
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- collapse thread

 
Dude, you're already fucked! We all are. With the HDD market now being a duopoly it is only to be expected that price drops will be slow to come. Why, why, oh, why didn't I buy a 2TB disk a couple of weeks before the floods but instead decided to wait for Christmas. Little did I know that I'll have to wait until next year's Christmas
1 0 [Posted by: kokara4a  | Date: 06/07/12 12:33:33 PM]
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It's more like f*ck us!

Here's what SEAGATE IS DOING NOW!

The digging started a while ago when it was clear that HDD Crisis Was Fake as Se... Digital Post Big Profits.

And then there was proof!


Nevemind the guy's ending quiestion as Anton has just answered it: Prices are NOT going down in the next two years if ever!
1 0 [Posted by: East17  | Date: 06/08/12 02:37:29 PM]
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2. 
Hmm, I am questioning those conclusions, since all statistics for IT demand are showing quite the opposite. Tablets, ultrabooks and laptops will keep requiring SSD. Next year probably OEM desktops will start getting SSDs routinely. When retail 256GB SSD breaks the $100 cost, consumer HDD market will evaporate...
0 1 [Posted by: Ananke  | Date: 06/07/12 09:47:36 AM]
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- collapse thread

 
actually people should learn to use primary an secondary memory. the primary will be al small 128GB SSD while the secundary wil be a 2TB< drive(s) so you just put the programs and other stuf you want to be fast and use a lot on the main drive. if you stoped using it a lot (games) then you copy it to secundary etc. so a 128GB SSD at 100€ is already good enough.but there will be demand voor 1TB< drives
1 0 [Posted by: massau  | Date: 06/07/12 12:41:13 PM]
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3. 
I hope HDD sales and profits fall like a hot rock - as payback for the unscrupulous exploitation of consumers.
1 0 [Posted by: beenthere  | Date: 06/07/12 11:00:57 AM]
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If you find it so profitable and exploitable to be a hard drive manufacturer, then start your own company.
0 0 [Posted by: Marburg U  | Date: 06/08/12 02:24:47 AM]
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4. 
That's fine with me. I will wait for 2014 before I buy any new HDD then. Maybe I'll be able to buy SSD for the price of HDD then.
And now I have a good reason to start deleting all that porn :D... well I mean all the crap I have gathered during the last decade. I will be forced to keep only worthy stuff and lose all everything that I will never use anyway.
3 0 [Posted by: Zingam  | Date: 06/07/12 01:22:39 PM]
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5. 
This is a pice a shit man !! But hey this is the BEST news aver for SSD , they will get cheaper and better . And we all know SSD are better the HDD . So we win and the greedy HDD companies are gone go kamikaze , because they cod do this in 2005 , when no one had ever herd of SSD , but now this type of business is just an idiots game .
1 0 [Posted by: ojohn  | Date: 06/07/12 02:15:53 PM]
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6. 
The price is set by what the market will wear plus 10% more just for luck, Its the same with the price of all pc parts. The manufacturing cost have little to do with what the market will pay.
Suckers like us keep them in business.
1 0 [Posted by: tedstoy  | Date: 06/07/12 05:10:44 PM]
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7. 
Continued high demand, supply that still hasn´t caught up, and wont for a few months yet IF predictions are correct, not something we can rely on, and finally some of the saddest mergers ever cutting down the competition badly...

Yeah no wonder if prices stay high for quite a while. And no, SSD cant take over, that´s just a silly claim, SSD will hopefully gain more traction from this but when you need lots of storage space, HDDs is still the obvious choice. SSD pricetags simply can´t compete when it comes to size.
1 0 [Posted by: DIREWOLF75  | Date: 06/07/12 05:58:47 PM]
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8. 
Few individuals need big storage capacity. Many may desire a 1 TB. HDD to store a lot of crap, but few people actually need these. Those who vote with their wallet can bring HDD prices back to reality. Those who must purchase high storage capacity can usually negotiate their real cost. Everyone else gets fleeced.
2 0 [Posted by: beenthere  | Date: 06/07/12 07:27:30 PM]
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- collapse thread

 
You cannot vote with your wallet this time. The demand exceeds the production capability of the industry; that's why you can see designs for the consumer market with less platters, they are trying at least to satisfy the request for drives, even if it's not enough to compensate for the request of storage memory.

Plus consumer niche is secondary compared to the rising demands of cloud and business markets. The bottom line is: if you don't need or don't want a new HD, there's plenty of subjects who desperately need it and will pay for it.
0 1 [Posted by: Marburg U  | Date: 06/08/12 02:41:14 AM]
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9. 
Let's hope the SSDs and especially the 256GB and larger will became cheaper...
0 0 [Posted by: TAViX  | Date: 06/08/12 02:03:25 AM]
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10. 
It is OK, I will postpone my buy till 2014. Meanwhile I'll get an SSD.
0 0 [Posted by: PsiAmp  | Date: 06/08/12 04:27:34 PM]
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