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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!
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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Maybe you should have stuck around for Economics 102.
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.
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 $160, about the same as last year from my recollection.
Of course, if you're buying 4x (say to build or replace a NAS), then you do see a noticeable cost difference, but it's not even 25% more.
A 16% (or even 37%) margin is does not indicate windfall profits or ludicrous extortion.
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It's called the "SSD" section on Newegg. You are right that head-in-the-clouds type tech people have been saying that magnetic media will get replaced, but it has just been wishful thinking. However now it is. SSDs sell quite readily. They aren't going to displace HDDs tomorrow or anything, and I'd say that 2 year timeline is a bit optimistic, but they are already making big in roads.
While they don't compete in terms of storage/$ 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.
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.