Storage HDD Prices

There are usually 170-180m hard drives made per quarter. We agree upon this right ? This is what WDC & Seagate are saying. Now remove both Western Digital factories for at least 2 months from the equation, that is minus 30m drives according to the WDC. We are at 140-150m now. Then you have the issues with the different subcontractors, which cannot provide the components for the hard drives, plus the logistic issues. This hit both Seagate and Toshiba, and will probably hit others too.

This way, you drop down to 110m hard drives made in Q4/2011. I wouldn't be surprised if the demands of the OEM (Dell,HP,...) are higher than this number - and now you probably see the issue. Western Digital, Seagate and others have no hard drives for retail market - and this pretty much kills any reasoning about "reasonable price" - there is none. There is no supply, so any asking price is valid because the supply won't be restored in short term.

Why not ? You probably ask this question. Well :
- one WDC factory will probably have to be rebuilt from scratch. 2-3 meters of water equals "you have to throw out everything".
- subcontractors will have issues meeting the demands of the manufacturers. Yes, they try to increase the production in other factories, but it is not like the boss walks in and he says "guys, we need to make twice the number of XY we made so far". Usually these companies run at close to 100% production rate, so even if they manage to increase the output by 10-20% you can call yourself lucky. And when you lose the majority of your production, that 10-20% will help a bit, but it cannot rescue the situation.
- let's say the water will be gone in a month. Then you need at least another month or two to recover the damages outside of the manufacturers - destroyed infrastructure (roads, bridges, ports).

Seriously, if anyone thinks that the current price level is the result of "greedy shops/distributors", then he probably have no idea of the situation.

 

Apparently I found some news that Seagate is running a full operation in Thailand without constraint of components. Also Nidec has been reported to have resumed production in Thailand and their overseas operations increased to recover lost production.

Surprise, surprise, I have found a news article discussing profiteering of hard drives in wake of the Thai floods.

I think discussions on this board is going to get interesting from now on.

 

Did you read it on the internet, if so it has to be true.

 

The information comes from a well respected financial news agency. Sorry to disappoint.

 

Cause we all know we can trust, respect and believe big companies......

 

modd1uk, I don't always believe big companies and over the years I've learnt how to filter good news.

 

Lap two of this reply :=)

Yep the bottom line is there is no drives coming in to the UK, or a tiny fraction of what there should be. The trade suppliers aren't low because they are selling fast they are low because they have none.
As good as some of the % production hypotheses are, you can’t beat reality, just ask a disti.

For example one Disti I know sold 100 HD's last week instead of the usual 15,000, that would of had to of been a pretty impressive mark up to be "profiteering".

You think its bad now wait till next week.....

 

Apparently you found eh?

So, because you say you found something your argument becomes more valid?
Link or it didn't happen, or it's just not a valid source.


Also, if this was all profiteering, the manufacturers would have started lowering their prices back down quick. You make a lot more money selling thousands of HDDs for $80 than you do selling a few hundred for $200.

 

Note also CEO John Coyne who is the CEO of WD stated last week on a conference call:

"December quarter revenue will fall 60 percent from a year ago since the company has a high concentration of supply chain factories in flooded areas"

Tim Leyden who is the operating chief also said:
"60 percent of its drives are produced in Thailand compared to 40 percent for the industry overall. The problem: Western Digital doesn’t know when it can get its plants running, but the problems will “continue into the March quarter and beyond,”

Also in the last 7 days, Apple, Dell, Seagate, Toshiba have all issued Q4 profit and revenue warnings, even Intel has downgraded its sales for Q4 (thats with a new CPU due).

 

This was the latest info from Seagate from CEO Steve Luczo “the flood disaster in Thailand is having a widespread impact on individuals and businesses of all types, including the hard drive industry, disrupting transportation, logistics, power generation, and the availability of labor.”

As for the hard drive industry, Luczo said the situation is “serious and highly volatile.” Due to pure luck, Seagate’s plants are completely operational and running at full production. However, Seagate’s component suppliers weren’t as lucky.

End quote.
This supplier is Nidec who make the motors to go 70- 80% of all the HD in the world (who are currently flooded)

 

Japan's Nidec Corp restarted its motor factory No. 1 in Bangkadi Industrial Park in Pathum Thani on Tuesday, after production was halted due to floods. Its factories in Pathum Thani and Ayutthaya supply more than 70% of all global HDD motors.

Nidec's shares have been flirting with seven-month lows on concerns about the impact of the Thai floods on its supply chain. Nidec added it would start making HDD motors in the Philippines and China to offset lost output.

Article dated 27 October.

 

And as someone who works in RnD for a big company knows it will take time to set up production and validate the new plants, because releasing sub par components is more damaging than releasing no components.

This will not be fixed overnight, all we can do is hope the families affected in Thailand stay safe and the plants remain closed until needed to try and prevent more fatalities.

 

Nidec are not using new sites. They operate in a few countries.

 

My 1.5TB WD drive i have in an external drive will see itself on ebay if prices go up any more. I paid about £65 for it i think, and i dont NEED the storage right now, i could easily go 6 months before buying more space, might as well make a tidy profit on the drive, its not that old and barely used.

 

2Tb Hitachi external drives from Comet, £85. Same unit from Scan, £120.

Just picked up a WD 1TB (the CSRTL2 one), cringed at the ticket price of £56.99, but grinned a bit when at the checkout it had already gone up a tenner, thankfully they marked it down for me.

<edit> opened the box, its a WD10EAVS. hardly groundbreaking spec...yet £80 elsewhere.....

 

For manufacturers of drives who are directly affected, yes. for manufacturers of drives who are unaffected, or any old stock mysteriously rising in price, sorry dude but I totally disagree. I don't think I'm being cynical by questioning why a drive made in february 2011 has gone up in price.

 

Good luck but I think most people would wait for the hysteria to die down before purchasing an hard drive.

 

None to minimal supply, high demand equals high price. It is called capitalism. The manufacturing date doesn't matter. What does matter is that shops got minimal number of new drives, and with wery high chance will get same minimal amount in the next months. The result of this is the high price you see now, and even higher you will see later.

 

Its because they still need to make a profit in that section over the next few months, so as supply is drying up all that profit has to be crammed into what stock is left...

 

The manufacturers who are unaffected cannot magically increase production to take advantage of all the demand that was fulfilled by the affected suppliers.

Also, as has been pointed out several times, even the manufactures whose plants are not flooded are directly affected. Seagate does not make every component in the HDDs they produce. Just because their plant is not flooded does not mean they have all the stuff necessary to make the HDDs.

Nidec, who provides most of the motors, has lost considerable production ability. They are having to restart plants in other areas, but RESTART means the plants have been sitting for a while - they have to get new workers, and they have to make sure the equipment can even produce HDDs right. Old plants cannot be restarted over night, and cannot meet the level of production the now flooded plants could achieve for some time.

Companies have to charge more for old stock because it won't be replaced in the future. They know they will make less money in the future because there is less to sell. In order to keep the company in business, they have to make up for the imminent loss in revenue. Therefore, they build up their cash reserve now.

These companies are playing finances smart, by not allowing themselves to go into debt in the future.