Why drive vendors are cutting their warranties

Why drive vendors are cutting their warranties

Summary: Disk drive vendors Seagate and WD have cut their warranties by up to 80%. Why now?

TOPICS: Storage, Hardware

The redoubtable Chris Mellor at the Reg noted the substantial decrease in most warranty terms. Does this have anything to do with supply constraints?

Of course it does - but its the story behind the changes that's interesting.

The floods Flooding in Thailand has cut disk drive production by several 10s of millions out of an annual ≈600 million number. Responding to supply and demand, the price of drives has risen 25-50%.

Mellor quotes Seagate's explanation:

By aligning to current industry standards Seagate can continue to focus its investments on technology innovation and unique product features that drive value for our customers rather than holding long-term reserves for warranty returns.

Nope, Seagate is scared. Here's what is really happening.

Pricing dynamics By cutting reserves held for returns, the vendors are cutting costs. Now, Seagate was happy 6 months ago to offer a 5 year warranty. They weren't too concerned about their ability to invest in "technology innovation and unique product features".

But now they are?

No, they've run into pricing pressure: customers don't want to pay the suddenly higher prices. 3 years ago that would have been Too Bad - and PC vendors and buyers would have paid.

But PC demand is flat and - more importantly - there's a substitute technology: the SSD. As a result, the price elasticity of demand isn't what disk vendors thought it was. Vendors are willing to not ship their low-end, low-margin PCs rather than take even lower margins than normal.

The Storage Bits take There are 2 elements here: price elasticity and disk drive capacity overshooting the market. The latter has been the unspoken risk to the drive business for the last 5 years.

Business users don't need 1TB notebook drives. Few need more than 120GB, unless they have big music or video collections. With the advent of cloud services like Pogoplug and iCloud, who needs the risk of carring everything they've ever done around?

This isn't new. The dizzying increase in disk areal density over the last 3 decades has led to market overshoot in 14", 9", 8", 5.25" and 3.5" drives. Each overshoot has led to the adoption of a smaller form factor.

Now 2.5" drives are overshooting too. But the difference today is that there is no smaller form factor for drive vendors to adopt. SSDs have killed the 1.8" drive.

Seagate has the right idea with their disk/flash hybrid drive, the Momentus XT - which I'm testing out - but since no other vendor offers an equivalent the big buyers aren't biting.

Drive vendors will get back to normal capacity faster than expected a month ago and sales will improve. But this disruption has everyone in the disk food chain rethinking their business models - and that isn't good for the status quo.

The good news for you: this doesn't mean less reliable drives. Just lower cost.

Comments welcome, of course. I wish I'd gotten an SSD on my new iMac. Mac OS X Lion expects an SSD.

Topics: Storage, Hardware

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  • Duopoly

    Because they can.
    • Fallout

      @davebarnes <br><br>SOS I stated yesterday in Portnoy's column. Only you tidied it up a bit by reducing things to one succinct word (with three more thrown in to cover cause n effect). ;)
  • RE: Why drive vendors are cutting their warranties

    Anecdotally, in my company it seems like our 2.5" drives are less reliable as their capacities increase. Our old 40 GB and 80 GB drives would run 5 or 6 years very often. Our 120 GB drives started having issues at 3-4 years. With our 512 GB drives, we're seeing some failures at just over 1 year. FWIW, the drive brand seems to make no difference. I'd love to see some Google analytics done if they ever change their data centers to 2.5" drives instead of 3.5" drives!
    • Drive reliability is going down the tubes as capacity goes up

      If you look at the feedback section of Amazon or Newegg, you'll see that the %age of problem drives as a %age of all feedback is quite high Granted, people with problems are going to speak up, and more loudly than those without problems. But if you look at the level of expertise that many of the buyers have, and the types of problems they are experiencing, the fact that these problems are occurring is troubling.
      • You and bmgoodman are right

        1. It is about warranty replacements being too expensive for the company

        1a. Expensive due to cutting corners in the first place
        1b. Laws of physics/magnetics rendering data corruption easier with high density media
        1c. Expensive due to pushing out new densities and industry standard algorithms that ends up costing data in the long run (which is driven in part by customers wanting larger density drives, partly because OS makers think 15GB is "nothing" nowadays, forgetting about fragmentation, corruption, speed issues as more files get added onto platters (and where on the platters), and other issues...)

        2. and if you take, at face value, the people responding. Many people blindly post 5 stars, having not bothered to do any testing for their products. I got burned with a memory upgrade once, and wondered how so many people could not be having problems yet I had, for the same model, of which I tried an exchange but still had the same problems (overheating, RAM test failing in the third sweep). So I tend to look more for people posting bad reviews, the amount of time they've had the product, and any common complaints or what can be construed as a common complaint between all the complainers. Those who complain, citing a strange problem, are more likely going to be a red herring - it's the common issue that many state that carries more weight.)

        3. you're right, rosanlo. The level of expertise combined with stated issue(s) say it all and it is troubling. But is the root cause sloppiness of the manufacturers or the laws of physics... If one brand has far more complaints of the same type compared to another, then I'd be more inclined to cite sloppiness...

        But I'd rather see a company be proud and stand behind its work with a guarantee.
  • RE: Why drive vendors are cutting their warranties

    Maybe the answer is simple - because of increased costs more to replace drives, the more often the company can say "sorry, out of warranty" the better for their bottom line.
    • Cynical, but not inaccurate

      in "the new normal" :(

      And people re-purchasing adds to their bottom line as well.

      One stone. Meet. Two birdies.
  • They are dropping waranties and quality to force more purchases.

    Pathetic Packaging for most drives now shipping made so cheaply.