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Higher Hard Drive Prices Are the New Normal
An anonymous reader tips an article looking at the state of HDD pricing now that the market has had time to recover from the flooding in Thailand and a round of consolidation among manufacturers. Prices have certainly declined from the high they reached during the flooding, but they've stabilized a bit higher than they were beforehand. Quoting:
"Are things going to change any time soon? We doubt it. WD and Seagate both reported record profits this past quarter. In Q1 2011, Western Digital reported net profit of $146M against sales of $2.3B while Seagate recorded $2.7B in revenue and $93 million in net income. That’s a net profit margin of 6% and 3%, respectively. For this past quarter, Western Digital reported sales of $3B (thanks in part to its acquisition of Hitachi) and a net income of $483 million, while Seagate hit $4.4B in revenue and $1.1B in profits. Net margin was 16% and 37% respectively. With profit margins like this, the hard drive manufacturers are going to be loath to cut prices. After years of barely making profits, the Thailand floods are the best excuse ever to drive record income for a few quarters. All of this means that while we expect prices to gradually decline, holding off on a necessary purchase doesn’t make much sense."
You mean, companies will collude together in order to raise the price of goods in that market? I'm shocked, shocked I tell ya!
Its the WD-Seagate cartel thats keeping prices up artifically and buying up any competitors
Most articles I've seen indicate that rotational storage (and existing flash-based SSDs) will be replaced within 2 years by memristor-based storage or similar non-rotational, non-flash storage. It makes no sense for hard drive manufacturers to "race to the bottom" when they've already consolidated into 2 major manufacturers and sales have such a short term outlook.
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I haven't been keeping up on this subject the last couple of months, but I was under the impression that the operations at the drive manufacturing plants were going to return to normal sooner rather than later. I would think that would cause prices to drop, even with the consolidation of the vendors. Otherwise, I'd suspect price-fixing.
"...today consumers have been conditioned to think of beer when they see a bullfrog..."
At some point they'll be done feeding pent-up demand.
This really is Economics 101. The maximum profit margin comes at the point where the supply curve and the demand curve meet. Raising prices above that point results in fewer sales and therefore less profit. Companies won't stop following this rule just because they have an "excuse" for raising prices. Partly because they didn't need an excuse in the first place, but mostly because they still have to compete with other companies.
So.. Collusion to keep prices artificially high? Yeah, I smell some antitrust action coming.
That flood worked out great for them, though.
In other news Western Digital and Seagate to relocate their manufacturing facilities to flood plains beneath leaky, poorly maintained earth dams..
... both drive companies have cut their warranties on consumer drives. Seagate to 1 year an WD to 2. A damn rip off if you ask me. I'd say don't buy a new drive unless you absolutely have to. I have no idea why seagate thought cutting it's drives to 1 year warranty was a great thing. It just pushed me over to WD easily. Not having a 3 warranty _at least_ IMHO is a big drawback.
In a perfectly competitive market with elastic supply and demand and where there are completely rational and well-informed consumers and producers, yes, your description of the market works.
The problem is, this is a case where there are only two major suppliers, demand is relatively inelastic, and the vast majority of consumers have no idea what a hard drive costs to make. In other words, what you're seeing is more like monopoly utility pricing - and that means that as long as higher prices can be reasonably justified to the consumer (flooding in Thailand!) the producer can set and maintain higher prices basically at will.
People love to shout "COLLUSION!" when more of their fellow consumers are buying the products they want - due to a) pent-up demand, and b) consumers hoarding products as protection against future price increases - but it's really just reality they are fighting against.
Reality is not going to change, and all you do by trying to fight it (i.e. by demanding the government intervene and impose price controls) is destroy the companies whose products you enjoy and depend on.
If you're making record profits, you don't change your prices. Neither do your competitors. Both could very well _independently_ come to this conclusion regardless of the actions of the other.
Plus the ripples from Thailand will still be felt for a long time, I wouldn't expect prices to have reached equilibrium yet.
They had a quarter where things seem to have stabalized at a bit higher than before, and they're making more profit than normal. This is a bad thing and collusion and it's probably related to the mergers and lack of competition. Totally not about them getting shafted by rebuilding costs because their factories flooded and destroyed a bunch of stuff during the few quarters before. No only look at this quarters profits. What evil corprate greed. They should be shamed.
You mean increasing the money supply causes prices to rise?
It seems like the 2TB desktop (ie, 3.5") disk is about $110. That's not so bad, considering I bought one for $95 about a year ago, before the floods. A 3TB is $160, about the same as last year from my recollection.
Of course, if you're buying 4x (say to build or replace a NAS), then you do see a noticeable cost difference, but it's not even 25% more.
A 16% (or even 37%) margin is does not indicate windfall profits or ludicrous extortion.
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Seeing a my 1st hard disk cost $80K per megabyte, I don't complain, much, about paying $78 for a terabyte.
These companies suffered major damage and lost a lot of money. If the consumers think "Hey they are back in business they should just drop their prices back down right now" thats stupid because they have a lot of lost money to recover. Not to mention they are a business and making money is what the do.
Companies are run by people. People are NOT rational. Alan Greenspan cited this as a problem, although IMHO Greenspan's bigger problem was to accept that corporations are people and then to assume that they were rational.
Rational actors maximizing profit is theory. Reality is insane people "managing" things into oblivion. If the HDD manufacturers try to squeeze the market to the point where solid state displaces HDD everywhere, and they fail to extract maximum profit because they are greedy, that will not surprise me one bit.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
I just picked up a 60GB Intel SATAIII SSD with around 550/450MB/s read/write for $65 on sale at newegg business. There's an SSD on crazy clearance sale every single day from Newegg and Infotel (aka Tiger Direct). 120GB went from $190 to $130 on average in the last couple months. So, until they come out with those 40TB spinning drives I heard about on Slashdot, I think traditional hard drive companies are going bankrupt if they don't change their prices or start making SSDs. I do have a feeling though that they're artificially inflating prices to raise capital in order to buy out a respectable but relatively small flash chip manufacturer like OCZ or Patriot. I think WD and Seagate could each afford that but their books look like crap from the shortage. Then they'd make both and tada, they're back in the market.
It's called the "SSD" section on Newegg. You are right that head-in-the-clouds type tech people have been saying that magnetic media will get replaced, but it has just been wishful thinking. However now it is. SSDs sell quite readily. They aren't going to displace HDDs tomorrow or anything, and I'd say that 2 year timeline is a bit optimistic, but they are already making big in roads.
While they don't compete in terms of storage/$ they are getting to the point where they are cheap enough for enough storage that people find them worthwhile. That's all it really takes. Few people actually need 2TB of storage, the idea that SSDs have to be dead equal to HDDs is silly. Many people will decide they can get on just fine with 160GB and would rather have the speed.
Always happens in the petroleum industry as well. Cartel collusion. War, summer travel season, weather creating shipping issues, refining problems, you name it. The price always goes up in large increments, and IF it comes down, never returns to its previous levels. I'm not amazed this happens in any other industry. Why should you stop reaping higher prices when supply returns?
WD and Seagate are morons in my opinion because neither have any kind of serious SSD lineup (both only have a couple enterprise parts, and I never see them mentioned on the list of companies to buy from). Higher HDD prices are just going to drive more people to SSDs as the SSD prices drop. It isn't a matter of competing on an equal dollar per GB amount, it is a matter of people close enough in absolute dollar terms.
So someone goes HDD shipping for a desktop, they find that it is somewhere in the $80-200 range, depending on what drive they want and what size. They look over at SSDs and discover, what do you know, you can have an SSD for that price. 128-160GB is perfectly doable in that range, maybe larger with sales (SSDs go on "sale" all the time).
Now it isn't near as much as an HDD. The HDDs are in the 500-2000GB range. However the person looks at their usage and discovers that they really don't use that much space, they can pack all their stuff in to 160GB no real problem. So they go for it, because of the massive increase in speed (an order of magnitude better seek times or more).
I've seen it happen many times. A friend just got a new laptop with a 160GB SSD. He was thinking about a 750GB HDD since he could store a lot of stuff, but looked and decided he really didn't have that much he needed and would rather have the speed.
While the HDD market isn't evaporating overnight, it is getting cut in to bigtime and it'll only get worse if the price differential changes.
While WD production is more or less back to what it was, there is still a lot of pent up demand for drives because of the past 9 months of high prices. This demand is providing impetus to keep prices up.
In addition contracts with vendors were signed at higher prices during the shortages. These contracts have not expired yet, keeping prices higher than they were when the floods occurred.
Looks like someone learned a little something from the oil industry: Natural Disaster; Raise Prices, blaming the disaster. When the disaster's effects are neutralized, do nothing. Profit!
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Maybe one year ago isn't such a good benchmark. Less than one year ago prices here were 5x EUR for 2TB (that is between 50 and 60 eur). I'm talking good retailers, both online and brick mortar stores.
Even after the flood (but not until the retailers got wind of the shortage) USB 2TB drives were going for 59EUR.
Now the cheapest bare 2 TB drive I can find is 110 EUR. Something from a reputable retailer like amazon is 120-150.
WD20EARS (entry-level WD 2TB) is on amazon marketplace (not amazon directly) between 350 and 9999 (!!!) eur.
Bottom line:
- prices are still more than double
- supply is still in shambles
The big thing I see is that warranty lengths have dropped off to 3 years from 5 years on many of the high-grade models that are selling today. They still sell 5 year warranties, but at a premium. The real cheap ones have dropped to 1 year warranties. Are prices back to where they were before the floods? Almost. Is product quality back to where it was? Nope.
I'll be waiting a little longer until I build myself another RAID. I believe we still have another quarter or two before we see the prices hit their baseline. I've been extending my purchase time frame by doing some serious house cleaning.
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I want to delete my account but Slashdot doesn't allow it.
While most of us are not in such a great position to do this, all that's needed is to continue to wait it out. Once supply channels are full and beginning to back up, the prices will begin to fall again. When it comes to consumable hardware (HDD's, fans, power supplies, etc.), I like to buy it when prices are low even if I don't need it at the time- eventually I will. Haven't bought a drive since before the floods. Holding out til I break or they do.
Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?
It's completely anecdotal, but I was waiting for the 2 TB/$100 threshold again, and that was finally broken a few weeks ago. I got one on a newegg sale. (Sure, it was via a $20 "rebate" but that was applied directly at the time of purchase.)
I was just looking at a receipt of an external 2TB WD drive from befor the flood, it was 69€. Yesterday I needed to buy an internal 2TB drive, the same 2TB WD Green was 117€ without the case. I would'nt call that ok.
Because before the floods, that 2 TB drive would have cost $60-$70.
I don't mind paying the current prices if they would quit selling garbage that fails in a week.
$1.1B net profit on $4.4B is 25% net margin, not 37%. It's not even 37% markup, it's ~33.3% (due to rounding, the range could be 30.8%-35.9%).
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I bought a "Western Digital Caviar Blue WD5000AAKX 500GB 7200 RPM 16MB Cache SATA 6.0Gb/s 3.5" Internal Hard Drive -Bare Drive" on Newegg in March '11 for $40. That was before the floods. I just bought another for $75. Ouch.
This really is Economics 101. The maximum profit margin comes at the point where the supply curve and the demand curve meet.
Not correct. The most common model is that profit is maximized where Marginal Revenue and Marginal Cost meet for an oligopoly. That is not not same thing as where the supply and demand curves meet. In fact when modeling a monopoly or oligopoly there is no supply curve because the firms get to choose how much to supply regardless of demand.
Well, as usual the story is more complex than that. The drive makers have recovered from the floods but tried to keep prices high artificially by holding back inventory. Now their inventory levels are eating them alive so I expect prices to ease soon.
They had a good run but at the end of the day they have to produce volume and if demand doesn't keep up prices have to go down to compensate. Pretty simple.
-Matt
If we actually got something of value, I think everyone would be OK with higher prices. But really. Hard disk reliability is horrible. For the past few years, we've seen click of death after 6 mo from Seagate, WD drives with 50% failure rates etc. etc. etc.. I can still remember when hard drives RARELY FAILED. Now failure is the norm. All of this started around the time that manufacturers started using the perpendicular technology. Cheap drives that fail soon and fail often are pretty worthless. Offer people a 4tb drive for $100 with a 75% chance of failure in the first 6 months and see how many people really want to buy it. I for one don't mind paying a higher price if I could count of the reliability of the drive. The problem today is we are paying 3 times the money for garbage and the drive makers are solving their massive failure rate by reducing the warranty period..
When I bought my hard drive it was @ $99. it is now $149
http://www.newegg.com/Product/Product.aspx?Item=N82E16822136284
Prices are not near being back to normal.
Don't know something? Look it up. Still don't know? Then ask.
You seem to think most users are clamouring for more space. That's really note the case. Heck I do media production (not on a professional scale) and I don't need more space. 60TB might sound wonderful to torrent heads who want to download everything they come across just to have it but to most users it is just excessive. I find most users don't even break 100GB, even with photos. People get large HDDs because they are cheap and larger = faster in HDD land, not because they need them.
Hence SSDs are very attractive to most people. They provide enough storage for your needs with much, MUCH better performance. They are also now getting down in the HD price category in terms of what an average user needs. If they can get a 2TB HDD for $150, or a 200GB SSD, for the same, they'll probably opt for the SSD. It is enough storage and way more performance. That it isn't as much storage per GB isn't relevant. Consumers care about it being cheap enough to afford and having enough storage for their needs.
I'm not saying that some people don't need tons of storage, but if you think the desktop user does, you are kidding yourself. The OS, a few apps, a few games, some pictures, some documents, it really only takes a couple hundred GB to be plenty.
Goes double with streaming video and download services like Steam. There gets to be no reason to packrat shit on the drive.
Last year I bought a 3 TB hard drive from Newegg for $110 before the floods. The prices now are still higher than they were.
WD20EARS has been discontinued, which is why it's so expensive. Its replacement is the next generation WD20EARX.
And by "my charts" I mean camelegg: http://camelegg.com/product/N82E16822152245
The market spiked and it's slowly returning to normal. It hasn't bottomed. I think that the time required is a combination of rebuilding manufacturing capacity, backlogged demand slowly being filled, and simple price inertia.
The 1TB Samsung (good solid main drive if you aren't using SSD's) drive I was paying $59 for before the shortage and the floods for all my personal and customer's builds is now down to $79.99. And you can get 3TB drives for around $170 again as well. Not bad IMO. I'm sure in another 3-6 months the prices will drop again for the holiday's. The price for that 1TB drive was $79.99 around this time last year as well. Only some manufacturers still have outrageous prices, most notably Western Digital.
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I was on a few sites the other day because I was shocked at the hard drive prices elsewhere... and I found that I could find lots of places that offered drives at what I had understood to be a good price.
I don't know what you guys are looking for... is 100 dollars for 1TB a good price? I thought that was a good price. I've seen some places that are charging 300 dollars for OEM 3.5 SATA drives that don't have any special features. That was why I looked elsewhere. I won't cite the places because I don't want to be confused with an ad bot.
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Gone are the days when you could guy a 2TB hard drive for $55 with free shipping from newegg. Only refurbished, high-capacity HDDs are priced below $100.
Measly 320gig 3.5inch WD HDD from newegg is $70 new. I remember when that same HDD was $40, not on sale.
Spinning disks are dead. They cost too much to produce, have too many moving parts, and require more expensive fabrication facilities than SSD. SSD manufacturing is easier and cheaper to distribute, preventing this problem.
If we wean ourselves off the Redmond Obesity, a 5Gig Flash drive of a Raspberry Pi will do whatever we want. Just don't go the Ubuntu Bloatway and instead use Xubuntu, Abiword and Gnumeric.
These tons of photos - get rid of them and a 5W computer will do.
Not this last Thanksgiving but the one before I purchased 2 2tb external! drives for around $50 US apiece I would say the prices are massively inflated currently. Going to build a new machine in the coming months and this will be the first personal computer I've ever built in 15 years that inherits every drive from the previous generation with no new ones purchased.
I wouldn't mind the prices if overall capacity was improving. Without the floods, and taking actual prices to be relative, I'd have expected the best price-per-gig to be 3-4TB by now. Last I checked a couple weeks ago, the best $/GB was either 1.5 or 2 depending on how much you're willing to skimp on quality, seek time, sata rate, or warrantee. This is slightly backwards from where things were in Oct 2011. I don't know how much of this is a normal bump in Moore's law or an actual slow-down of R&D due to floods, mergers or something else.
I'd hoped to rebuild a RAID by now, but it can probably wait til 2013. Sad that these floods have impacted our technological progress, and shame on price-fixing greedy corporate shills, but personally, I choose to be humbled that my hard drive woes are nothing compared to the displacement faced by people under the Thai floods. My life could be a lot worse.
... holding off on a necessary purchase doesn’t make much sense.
Where did the author of those words learn economic theory? Holding off - or rather out - is the ONLY response that makes any sense. What other motivation will these One-Percenter manufacturers have to reduce prices if not the direct loss of market if they don't? Have we learned nothing at all from the message that the Occupy movement(s) are trying to spread?
I mentioned that to a friend the other night. I have an array populated with Spinpoints I purchased five years ago, none of which have ever failed or developed bad sectors. I also have a single non-enterprise Seagate drive that I've RMA'd both of the two years I've had it within its 3 year warranty. Since Seagate's purchase of the Spinpoint line, I've heard the quality of the drives has decreased to Seagate's typical levels, so I'm getting a little antsy about waiting to find replacements that will meet the quality standards and warranty length I want for anywhere near the price I paid several years ago (about $80 per 1TB HDD). I'm holding tight one more year because right now the only sub $100 drives are lower quality that what I currently have and only have 1 year warranties. In the mean time, I've been burning everything to the mountains of blank DVDs I've accumulated over the years for coasters or skeet shooting if there's no massive failure.
I bought a 2TB 3.5" disk in March 2011 for $70 Canadian. They were at $70 for at least a few months before the flood.
Damn these mega corps. I can't believe that they would make a 6% profit on a product that people want to buy. Why doesn't the government step in and finally tell them how much money they are allowed to make and give to their minions (also known as employees).
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The fact that they're not commonly produced anymore doesn't mean plenty of people don't still own one; if nothing else, I've seen a heck of a lot of people taking about theirs on the AnythingButiPod and Rockbox (firmware) forums.
I virtually never see any players in public these days except at the gym. Even then, only about 10% of the people I see are using one, and it's usually in the size range that makes it impossible to tell if it's HD or flash-based.
Now mostly at Usenet:comp.misc & SoylentNews.org (it's made of people!)
I'm sure that a few people are using them. It seems like on rapid transit, most of the riders with attached earbuds are plugged into either a tiny flash based player or their cell phone. HDs are mostly for a niche that has a really large music collection.
Here in Finland HDD prices have always been high for some reason, but before the floods I could get a 1TB drive for 50 euro (~$63) whereas now a similar one costs 82 euro (~$102). That is quite a high difference in price, 164% the price it was back then.
The last HD I bought was a 2TB for 65$. The exact same HD goes for 120$ as of today.That was over a year ago. One would expect given normal progression that the 3TB HD would be about the same as the 2TB about a year later, a 3TB costs 165$ right now.
Anyway you look at it, *right now* you are paying for over 2 year old technology (which is a lot, as it was on sale even then, and being replaced) at a premium of +84%, which is still significant. Sure its not the ridiculous prices of 384% during the height of the flood, but still. If you consider where we should be, which is something around 65$ for a 3TB, we are still at a +253% over nominal prices pre-flood.
So I still consider their prices to be very over inflated. I have not purchased another HD since, and I will not until they wish to become reasonable. I would rather look at alternatives than pay want they are asking (clean up data, delete stuff of low importance). If enough people are like me, then they will start to compete again, as they are not going to be making money off unsold HD.
SSD is another matter entirely. That also has to come down in price however. I would buy an SSD in the near future however, but even if I built a new PC I would "make do" with what current HD storage I have. I refuse to pay that BS.
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