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Tuesday, May 29, 2012
HDD Prices Remain High Despite Industry Recovery From Flood

Although Hard disk Drive manufacturing capacity has reached at or near pre-flood levels, hard drive prices have not settled back.

Last October's floods in Thailand cut the 25 percent of the world's hard drive manufacturing capability. Western Digital's capacity was severely hit, while Seagate's subcomponent suppliers also took a hit.

While the demand for HDD remained high, the thin supply stocks drove prices very high by November 2011. For example, the price of a WD 2TB Caviar Green 20EARS went from $70 before the flood, up to $245 in less than a month. The price was then decreased to $163 by December and currently, the drive sells online for $200 - almost 70% higher than its pre-flood price. Prices of Seagate's HDDs also followed a similar trend. The Seagate 2TB Barracuda Green ST2000DL003 now sells for $120, still almost 70% higher than its retail price prior to the floods.

"Shipments for hard disk drive (HDD) units in Q4 2011 and Q1 2012 were approximately 29.1% and 16.6% lower than the pre-Thailand flood number of 174 million in Q3 2011. However, the Average Selling Prices (ASPs) in the post-flood timeframe were approximately 28% higher than in the pre-flood period in both quarters," iSupply notes in a recent report.

These increased prices have helped both HDD makers report high profit margins for the quarter ending March 31, 2012.

Western Digital reported sales at $3.04 billion, with $483 million in net profit, for a net margin of 16 percent. Seagate reported sales at $4.45 billion with a net profit of $1.146 billion, for a net margin of 25 percent.

It is not clear whether HDD prices will come down any time soon.

Figures released this week by IT market research company CONTEXT show that sales through distribution of internal hard disk drives grew by 36% across Western Europe during the first four months of 2012. The HDD market in the UK grew by 78% with sales in the 1TB drives category showing a jump of over 52% in sales compared to 31% across Western Europe.

The research firm notes that the market has seen a spike in the sale of 1TB drives with Western Digital showing sales tripling over the first four months of the year. This is partly due to a 25% reduction in prices as well as an indication that the market for higher capacity drives is slowly on its way back up to pre-­flood levels, the research firm says.

"Although average selling prices in April were still up +58% year on year, we are now seeing prices gradually on their way back down from the high November", said Senthuran Premakumar, Enterprise Analyst at CONTEXT. "Going forward, we expect to see sales increasing further for both 1TB as well as other high capacity drives."

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