Thai Floods Gone, High HDD Prices Remain

The Thai flood waters are long gone and HDD manufacturing has recovered to record levels. So, why are hard-disk drives still so expensive? Get used to it, experts say.

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It’s been just over a year since floods ravaged Thailand, decimating production of hard-disk drives and sending HDD prices skyrocketing. Now, with the flood waters long receded, global supply of storage drives has rebounded to record levels, but the price hikes for the components will remain in place at least for the foreseeable future, industry experts say.

The good news? Solid-state drives (SSDs), while still pricey, are fast becoming comparatively cheaper.

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German price-comparison firm Idealo Internet GmbH recently analyzed storage drive pricing data from top manufacturers such as Western Digital Corp, Hitachi Global Storage Technologies (owned by WD), Seagate Technology LLC or Samsung Electronics Co. While the prices of hard drives have decreased in each of the last three quarters, the average price remains 47 percent higher than pre-Thai-flood prices from Q3 of 2011. The flood caused an average 70-percent hike in HDD prices in Q4 last year with some units spiking as much as 150 percent.

The Thailand floods in October 2011 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 Idealo findings would appear to dash hopes that a normalization of the HDD supply chain would ease hard-drive price hikes, which resulted in price hike across the IT spectrum from vendors ranging from Hewlett-Packard Co. and EMC Corp. to NetApp Inc. and Zenith Infotech Ltd. Fang Zahng , a market analyst from IHS iSuppli, said HDD prices would likely remain high through at least 2014 due to increased pricing power among the top manufacturers.

This despite iSuppli figures that show the HDD poised to hit an all time high with 524 million PC-bound units shipping this year, topping the previous record by more than 4 percent. iSuppli predicts total annual hard drive shipments will top 575 million units by 2016. The uptick is being driven, in part, by brisk sales of Microsoft Corp.’s new Windows 8 operating system, which is mostly being adopted by users buying new hardware. The commensurate reduction is costs due to ramped up sales and volume, however, is not materializing in the HDD market

Prices for SSDs meanwhile, have dropped in each of the past six quarters, Idealo found. In 2012, SSD prices fell 24 percent with the average per-GB price landing more than 30 cents below the cost in Q4 of 2011. The most significant SSD price decreases come from larger capacity drives in the range of 160-256GB, where costs are approaching $1 per GB.

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