Seagate Expects Issues with Hard Drive Supply to Persist Through 2012

Seagate's CEO Gives Ultra-Negative Prediction for HDD Industry

by Anton Shilov
11/17/2011 | 03:48 PM

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.