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Hard Drive Prices Hitting New Lows
Lucas123 writes "The average price of notebook hard drives tumbled to $53 in the third quarter of 2007, from $86 in the same period during the previous year, according to a survey by a market research firm. The price drop can be accredited to competition among six vendors, enormous demand for PCs and consumer electronics as well as evolving flash memory drives. 'Lower-capacity notebook drives showed smaller price drops, while newer high-capacity drives saw massive price drops ... Notebook drives with 320GB of storage will drop as a result of the addition of new features, while prices will stabilize on lower-capacity notebook storage devices like 80GB hard drives.'"
Enormous demand only means increasing prices if supply stays limited. As the article notes, though competition to meet that demand is fierce between the vendors, meaning increasing supply with demand and increased economies of scale, hence lower prices.
I studied this with hard disks and my data showed that the "sweet spot" hard disk (the drive with the best bang for buck) has actually steadily decreaased over time.
You can see the chart at the bottom of this page:
http://www.mattscomputertrends.com/harddrives.html
look in the Annual Sweet Spot Price Trends section.
Basically, my data disagrees with you. The average drive is getting cheaper.
That is not "unpossible".
Mass production is only viable with high demand. I'm not sure if you ever tried to negotiate shipment from a Taiwanese company. When they say 100, they are talking about 100 thousand units. 10K units is what they call a "small shipment". But I digress.
Anyway, a good part of the cost of a product is related to development. Creating new technologies is expensive. Several other costs don't scale directly with the number of items. So the greater the production, the smaller the cost per unit.
Add to that 5 other companies doing the same math, competing for the same market, and the prices will drop the higher the demand.
Ever since Henry Ford, the simple law of "supply and demand" is not so simple anymore. More often than not, the higher the demand, the lower the prices.
morcego
Australia doesnt have a retail culture of rebates. It never has had one. The price used is the lowest advertised price found in a reputable computer magazine. This means the prices are good representation of what people payed for the drive at the time. It's Apples to Apples.
Take a walk into a 99 cent store sometime. Most of them now carry USB and Firewire cables at... You guessed it... 99 Cents. It is hard to believe that people are spending upward of $20 for a cable that obviously can be sold for $1 at a profit.
That's a shame - you were on a roll, writing the truth, etc. Then you wrote the above and went right off a cliff.
There's a lot of economic illiteracy in this thread, so let me clear up a couple of things. The law of supply and demand is basically a static law, making the implicit assumption that the supply and demand curves won't change (i.e. that supply and demand respond only to price, ignoring capital improvement, consumer needs, etc.). Since it's (nearly) always the case that, ignoring these other factors, higher prices result in lower demand and higher supply, the demand curve is downward sloping the the supply curve is upward sloping. Therefore, if the demand curve shifts up (which is what we mean when we say that "demand has increased"), the price will go up.
What you're talking about is that suppliers are predicting this and building out capital to expand capacity. This shifts the supply curve up. When both the supply and demand curves rise, the price may rise, stay the same or fall, and volume always increases. Your contention that prices will fall is simply untrue - what is true is that since marginal unit cost of production (esp. of tech products) tends to fall over time, supply can sometimes be increased dramatically. This is all perfectly captured by the old, boring law of supply and demand.
...following the principles of Heisenburger's Uncertain Cat...