Hard Drive Prices Beginning to Subside

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Hard drive price spikes are beginning to recede as supply chains start returning to normal following last fall’s devastating floods in Thailand. While availability is getting easier, supply and price stabilization will still take time.

UPDATE: Hard Drive Shortages Crimp Lenovo Profits

Hard disk drive factories in Southeast Asia are beginning to come back online, and the flow of fresh components is already starting to drive prices back down.

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Analysts had initially predicted a year or more would pass before HDD supply chains normalize and prices recede from their 50 to 150 percent price spikes. The restoration of some factories in Thailand and the switch to alternative manufacturers outside Southeast Asia is easing the supply chain issues, analyst report.

While HHD will remain difficult to source for many vendors, analysts are now forecasting normalization as early as the end of this quarter (March or early April). The result will be lower prices, they say.

Part of what will help HDD pricing isn’t so much a full restoration of supply chain capacity, but a true normalization of supply and demand. The demand for HDD is historically low in the first quarter. As capacity increases and demand decreases, the HDD market should reach equilibrium and produce enough of an effect to bring prices down.

The market lull just might be enough of a breather to give the HDD component market enough time to fully recover without extending the impact of the Thailand floods through the end of 2012 and into 2013, as initially predicted.

The Thailand floods in October revealed a vulnerability in the computing and appliance components supply chain. Much of the world’s HDD manufacturing capacity is in Thailand, and the floods literally swamped factories.

The market was slow to respond to the disruption as existing inventory was enough to fulfill short-term demand. However, many vendors soon realized that price hikes brought on by shortages required them to pass costs on to partners and customers. Among the vendors to announce price hikes are Hewlett-Packard, NetApp, EMC and Zenith Infotech.

The market impact caused by the Thailand floods hasn’t been entirely bad. Distribution giant Ingram Micro attributed part of its quarterly financial performance boost to hard drive price increases. And the hard drive crisis has bolstered the use of cloud storage and file synchronization services.

No vendor has announced a reversal of “temporary” price increases caused by the HDD supply disruptions. Channelnomics doesn’t expect to see vendor prices recede until supply chains are more stabilized – probably some time in the second quarter. The vendors need time to recoup the cost of switching to alternate suppliers.

While supply shortages ease, analysts warn that certain HDD drives – particularly 500 GB and 1 TB models – will remain under stock for the foreseeable future.

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