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Hard Drive Shortage Relief Coming In Q1 2012
MojoKid writes "According to new reports [note: source article at DigiTimes], global HDD production capacity is getting ready to increase to 140-145 million units in the first quarter of 2012, or about 80 percent of where it was prior to when the floods hit Thailand manufacturing plants. HDD production was sitting around 175 million units in the third quarter of 2011 before the floods, after which time it quickly dropped to 120-125 million units. Since then, there's been a concerted effort to restore operations to pre-flood levels."
It's great that HDD production is about to increase again, but I think the recent "crunch" was also a good thing in a way. Perhaps it encouraged some end users to get more creative with data storage techniques, resulting in more efficient systems that can do more with less bulk storage capacity. At least I can hope so.
Write failed: Broken pipe
It's not all their fault, really. MSPaint doesn't have JPEG support in Windows 98.
Uhhh... unless they're using some new calendar I'm unfamiliar with, the first quarter is about two-thirds over. The fact that they're using the future tense for something which is already mostly gone makes me wonder just how well informed this article is.
dragonhawk@iname.microsoft.com
I do not like Microsoft. Remove them from my email address.
...how does a production shortfall of less than 50% result in a price hike of *over 300%*??
This curve should explain it: http://en.wikipedia.org/wiki/Supply_and_demand
"I zero-index my hamsters" - Willtor (147206)
1. Big OEM contracts agreed long in advance takes priority, so everything had to be absorbed by the spot market which is much smaller.
2. If you don't have a HDD, you practically can't sell a new machine and for many commercial services not buying is not an option.
3. As smart people in the market realize what was about to happen, they made sure to buy now "just in case" emptying the market.
4. Even OEMs started to fear the shortage and started buying HDDs in the spot market as insurance.
Sum of all of the above = it probably took a 300% price hike until sales dropped 25% to match supply. Spot sales probably had to drop 50-80% for that to happen.
Live today, because you never know what tomorrow brings
Just to elucidate, a x% reduction in amount of HDDs does not translate into an x% increase in price (which is impossible since the units are different). It results in an x% reduction in number of people who can buy HDDs.
Pretend that 100 people want to buy one HDD each. If there are only 50 identical HDDs, that doesn't mean that the price goes up 50% (or 100%). It means that only 50 people can buy HDDs. The other 50 have to go without.
Sort everyone by how much they're willing to pay for a HDD, from lowest to highest. Then the highest price that the 51th person is willing to pay for a HDD is the new market price. If he's willing to pay just 10% more, then the price for HDDs goes up 10%. If he's willing to pay 300% more, then the price for HDDs goes up 300%. His price is higher than the first 50 people are willing to pay, so they choose simply not to buy a HDD at his price. Consequently there are only 50 people left who want to buy HDDs, and only 50 HDDs for sale.
Long story short, it's a 5 platter design and generally they've not been good in the past, too many parts to be reliable. The other manufacturers are probably waiting until they can ship a 4x1TB disk instead of 5x800GB. Hitachi is actually shipping 1x1TB disks in the 4K7000.D and 4K5000.B class, but I guess the yield of perfect platters is too low yet.
Live today, because you never know what tomorrow brings
I'm sorry, what exactly are you raging about? Just about every pricing theory from monopoly pricing to perfect competition require that costs be passed to you. If raw material costs go up, the costs are passed to you. If labor costs go up, the costs are passed to you. If people shoplift, the costs are passed to you. If the government adds a new tax, the costs are passed to you. If natural disasters cause damage, the cost is passed to you. Every business operates on margins, that more money comes in through revenue than what leaves through cost. That goes for everyone from the 1%ers to the corner shop.
Do you expect it to be like in good years they'll take a profit, and in bad years they'll put the money back? Seriously? I wonder how you'd like it if your salary or your bank account worked like that. No, if I owned Newegg I'd expect it to turn a profit whether disks costs $50 or $300, my job is to beat all the other stores trying to make a business, not fight the market forces. In the long run I expect it to be the same for factories, if risk of flooding is a cost of doing business we must account for that and make sure our prices reflect all the costs, it's the ones that don't that are foolish. In short, I find your idea that 1%ers should "foot the bill" rather absurd.
Live today, because you never know what tomorrow brings
You're thinking too short-term. Say the government forced manufacturers to keep HDDs at their original price and sell them via lottery. The 50 HDDs would sell out. The manufacturers would look at the how much money they're making per HDD, and conclude they don't provide enough profit for them to repair their factories. Consequently, next month when the next batch arrives, there are 50 HDDs again, and 150 people (the 50 who didn't get one last time + 100 new people) wanting to buy them.
Your attempt at fair HDD distribution means there's a constant shortage. Then one day, some of the poorer people who got a HDD suddenly realizes that he can resell it for a lot more than they paid for it. A black market appears. Lots of other people who don't need HDDs realize the price differential between your fixed price and the true market price provides an arbitrage opportunity, and they enter the lottery for HDDs. Now you have 50 HDDs being produced per month, and 5000 people wanting to buy them. So of the 50 HDDs you're selling via lottery, only about 5 end up in the hands of people who actually need a HDD, the other 45 go to resellers flipping them on the black market for a profit. So most of the people who need HDDs are actually paying the higher price despite your price fixing, and the extra money is going to flippers instead of the manufacturers so there's no incentive for them to fix your real problem - a shortage of HDDs.
OTOH, if you allow the market price to increase, it provides the manufacturers the resources and the incentive to repair their factories and increase supply. Other companies who used to make HDDs but scaled it back look at the higher price, and say hey, there's a lot of money to be made, we should start making HDDs again. Next month they make 60 HDDs, and the price creeps down. Next month they make 85 HDDs and the price drops some more. And the next back they make 110 HDDs. The 10 extra means people who didn't get a HDD in previous months gradually get theirs. Eventually everyone who previously wanted a HDD gets one. Next month there are 100 new people who want HDDs.
Now the reverse of the previous situation happens. There are only 100 people who want HDDs, but the manufacturers are still making 110. There's an oversupply. The manufacturers cut their prices below the 100-drive level to try to sell out their drives before their competitors can. The market price now settles at the lowest price the 100th seller is willing to sell for. The extra 10 HDDs carry over to the next month and now there's a 20 drive oversupply, driving the price even lower. Eventually some of the manufacturers see their dropping profit, cry uncle, and scale back production. The manufacture of HDDs stabilizes again at 100 per month, exactly matching demand.
This isn't a system which favors sellers over buyers. It treats both the same. Sellers are at an advantage when there's a shortage. Buyers are at an advantage when there's oversupply (which is the state the HDD industry has been in most of the time - why IBM sold off its storage division to Hitachi, who is now trying to sell it to Western Digital). The price fluctuations are the feedback mechanism which cause manufacturers to produce more or fewer drives in response to demand. Eliminate it and you break the economy.