Hard drive market might not fully recover until 2014

Hard drive market might not fully recover until 2014

Summary: Inflated pricing is a temporary fix for the hard drive industry, but don't expect revenue numbers to recover completely for at least two years.

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TOPICS: Hardware
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Bad news for the hard disk drive industry. A new report from market intelligence firm IHS iSuppli suggests that the beleaguered market might not recover until at least 2014 following devastating floods in Thailand last fall that had a serious impact for suppliers with factories there.

In February, IHS analysts previously predicted that we wouldn't see signs of recovery until at least the third quarter of 2012, but even that might have seemed too optimistic.

Yet, shipments still rose by 18 percent to 145 million in the first quarter and then by 10 percent to 159 million in the second quarter.

Fang Zhang, an analyst covering storage systems at IHS, explained in the report that this all has to do with higher pricing, which is really just a band-aid for the problem.

HDD manufacturers now have greater pricing power than they did in 2011, allowing them to keep ASPs steady. With the two mega-mergers between Seagate/Samsung and Western Digital/Hitachi GST, the two top suppliers held 85 percent of HDD market share in the first quarter 2012. This was up from 62 percent in the third quarter of 2011, before the mergers. The concentration of market share has resulted in an oligarchy where the top players can control pricing and are able to keep ASPs at a relatively high level.

Overall, the big predictions here are that while shipment levels might continue to increase in Q3 2012, pricing will remain inflated throughout 2012 and 2013.

So far, only Seagate seems to be managing its finances and inventory well enough through 2012 so far. The Cupertino, Calif.-based storage giant just bought out French competitor LaCie to compliment its hard drive portfolio for both consumer and business hard drive and server solutions.

Furthermore, along with strong earnings for the second fiscal quarteranother report from IHS iSuppli posited that Seagate actually got a boost from the natural disaster. That’s mainly thanks to geography as Seagate’s HDD manufacturing plants are on higher ground, in comparison to Western Digital, which saw its facilities engulfed by the floods.

Seagate’s momentum continued through the third fiscal quarter with solid earnings and revenue announced in April.

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Topic: Hardware

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8 comments
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  • HERE IS A DUMB IDEA!!!!

    How about we manufacture some of them in the U.S.A. = Jobs!!!!
    O.K., so it would be more expensive but if they can't deliver the product (s) then it would be a default on their contract (s)... Love to see some of the "out-source" come back to the states... Remember when Walmart didn't handle any product that was not made in the USA??? Not old enough??? Didn't mean to sound political... Just an ole mans' ramblings
    puppadave
    • becasue..

      A) You don't have the manufacturing infrastructure in place like factories
      B) You don't have a skilled workforce willing to to do menial factory work
      C) You're workers expect high wages and good working conditions.
      Scarface Claw
    • Eggs in a single basket

      Unpredictable factors such as natural disasters, political upheavals and wars can and do occur. Concentrating production in any one zone has always proved to be a weak minded idea in the long run.

      The US does have facilities that can be retooled and a workforce that is ready and would be fairly easy to re-train. As to wages, the additional cost per unit to produce will be offset in the long run by production stability as well as the improvement to the economy and least we forget, tax revenues.

      Heck, the US is the major buyer of just about everything world-wide anyhow and most Americans would not quibble about paying more per unit for anything if they could see and feel an overall financial benefit.
      BWSOLO
  • Huh?

    $80 or so for a 1TB hard drive is an inflated price? What should the price be?

    I remember not that long ago 1TB going for $200+
    cmwade1977
    • Cheapest I have seen is 120 dollars

      Care to inform where you saw that price at.
      Lerianis10
      • $80 1TB HD

        I found one here: http://www.newegg.com/Product/Product.aspx?Item=N82E16822145304
        TheBrass
  • iSuppli has got this wrong

    Sure, 2 vendors control most disk manufacturing. But 1 vendor - HP - buys about half the world's disks. Who's got more power?

    When disks are in short supply, the vendors. But as supply constraints ease - which is clearly already happening from iSuppli's own numbers - the power shifts to buyers. Add in the shift to SSDs I expect from Apple and for Ultrabooks and vendors have even less control.

    Most of the pricing damage from the Thai floods will be over by year-end 2012. By 2014 it will be a distant memory for consumers. 2nd tier vendors who signed long-term agreements locking in higher prices are only hastening the consolidation of the mature PC industry by giving up margin dollars to HP and other big consumers.
    R Harris
    • Perhaps HP was dumb exiting the hard disc market years ago

      Perhaps HP exiting the hard disk maunfacturing business in the 90's was a dumb idea, as they ended up consuming up to half the world's hard disks.

      haven't you heard of vertical integration - Samsung do very nicely at this, selling capacity to people like Apple, over and above it's own needs.
      neil.postlethwaite