As a response to the flood in Thailand
, prices for hard disk went up considerably in the past week around the globe. The manufacturing plants of both hard disk companies as well as their necessary suppliers had to stop production which will subsequently lead to a shortage of HDDs in the fourth quarter of 2011.
Hard disk prices have already been under pressure throughout the last months. According to sources in the industry, this was mostly caused by rising prices on certain rare earth metals. This already caused prices to rise by up to 5% on some models. While this could definitely be observed, it didn't bother most buyers. It was mostly of interest for channel companies and OEMs who buy hard drives in bulk and feel even subtle changes in pricing. But now, a real shortage seems to manifest itself, resulting to prices rising by as much as 50%, with a lot of drives in the +30% range.
As an example we picked a few popular models with a very good Euro/GB ratio to show how the prices changed in the recent past. As you can see, the price of Western Digital 2TB Green drive went up by more than 100%: from 61.60 to 129.90 EUR, i.e. from $85 to $179
The price of 3TB Barracuda XT shot up from 169 EUR ($233) to massive 292 EUR ($403)
According to channel sources, inventory levels started to decline quickly following the Flood catastrophe in Thailand. While currently various merchants are still well stocked, supply levels are running dry. The prices have already stabilized on a higher level, but it remains to be seen how quickly the big HDD manufacturers can recover from the incident.
World's largest hard drive manufacturer, Western Digital
was hit very hard, as about 60% of their manufacturing plants are located in the affected region in Thailand
, all of which are under approxilately 1.5 meter (5 feet) of water, as you can see in our gallery. Speakers claim that in the fourth quarter the company will produce about 34 million less drives than originally planned. Of course this will also negatively affect sales and financial results.Seagate
on the other hand wasn't directly impacted as their plants are located in a different regions in Thailand. However, since Seagate depends on some supplier companies that are affected by the flood, production stalled and some plants had to be shut down too.
The supply chain is affected as well. Nidec
, a manufacturer of motors used for hard disk drives, reportedly had to cut production by about 60 percent. This has a detrimental effect on the HDD manufacturers as Nidec commands a 75% share of the market of such components. Other companies located in the Phillipines or China might be able to replace some of those capacities, but certainly not the whole volume.
While concentrating all the necessary manufacturing plants in a similar region might have cost advantages in regular production, in the case of such extreme events it can quickly turn into a nightmare for the affected companies. Earlier this year there have been fears that the Tsunami might have an adverse effect on the PC industry. In that case, the impact was minimal as it mostly impacted the optical media industry. The Thailand flood seems to have a stronger impact on suppliers of the PC industry.
The results of the hard disk shortage and subsequent price rise will also hit other companies downstream in the PC market. Particularly OEMs building PCs seem to be at risk, even though those companies are said to be very resilient, as numerous executives in the industry said in the past week. But Acer already lowered their outlook for the fourth quarter substantially. Originally the company projected a 5% uptick in notebook sales for the fourth quarter, but now it expects a 5-10% decline due to the HDD shortage. Other companies like Dell and HP expect an impact as well. Overall about 170 million hard disk drives are required to satisfy demand in the whole quarter, according to analysts. Currently it looks like only 75% of that demand can be met.
AMD and Intel don't believe it will affect their bottom line substantially. But if OEMs really have up to 10% lower sales, then it will make an impact. With very tighly managed inventories orders for components like CPUs and chipsets naturally have to decline as your sales volume goes down. For example, ASUS only has four weeks worth of hard drive supply, after which the company won't be able to build new notebooks - sans the ones for which SSD was selected.
Moving to SSDs as a HDD replacement is not really an option due to significantly lower storage capacities. Prior to the price surge on HDDs, SDDs were about 30 times more expensive per amount of storage provided when compared to 3.5" desktop hard drives (with the new prices this number plummeted to 20x). Compared to 2.5" notebook HDDs, SDDs used to be more expensive by a factor of ~13, which changed down to less than tenfold. However, as HDDs become more expensive, some customers might consider to take the plunge. SSDs sport significantly lower access times leading to faster startup times. In mobile computers there are power savings on top of that, mainly due to the fact that there are no moving parts.
Mobile and Tablet market could also be affected by the lack of supply on NAND Flash market, with SSD makers increasing volume production and targeting PC market, offering higher pricing per chip than tablet and phone markets.
Given the supply situation with RAM, lower demand for memory modules may cause prices to drop further. DRAM prices are already at very low levels due to high inventory levels and low demand. If PC sales take a hit, the DRAM market will be affected too. Market analysts predicted that the DRAM prices will stay low for at least another 6 months. Reduced PC unit sales could prolong this period.
© 2009 - 2014 Bright Side Of News*, All rights reserved.