A Year After Thailand Flooding, Hard Drive Prices Remain High

crookedvulture writes "Last October, Thailand was hit by massive flooding that put much of the world's hard drive industry under water. Production slowed to a crawl as drive makers and their suppliers mopped up the damage, and prices predictably skyrocketed. One year later, production has rebounded, with the industry expected to ship more drives in 2012 than it did in 2011. For the most part, though, hard drive prices haven't returned to pre-flood levels. Although 2.5" notebook drives are a little cheaper now than before the flood, the average price of 3.5" desktop drives is up 35% from a year ago. Prices have certainly fallen dramatically from their post-flood peaks, but the rate of decline has slowed substantially in recent months, suggesting that higher prices are the new norm for desktop drives."

Comments

Why not?

[Severus Snape]

If they can get away with charging the extra, they are hardly going to reduce their profit margins now.

Re:Why not?

[K. S. Kyosuke]

It kind of reminds me of the practices of local gas pumps...well, some of them anyway. When the prices on the international crude oil market go up, they raise their prices. Whey they go down again, they reduce their prices. Only the latency in the former case is noticeably smaller. ;) Bastards.

Re:Why not?

[Nadaka]

The market is much less willing to bear arbitrary price jacking than price jacking related to a major event.

Re:Why not?

[oxdas]

Public companies do NOT have a fiduciary duty to maximize profits, only to follow the company charter. Even in the most often cited case creating fiduciary responsibility to maximize profits, Dodge v. Ford Motor Company (1919), the court said this in regards to Henry Ford's desire to reduce the price of his cars for his stated, purely altruistic, motives (and in doing so cancel a special dividend to his shareholders):

" We do not draw in question, nor do counsel for the plaintiffs do so, the validity of the general proposition stated by counsel⦠that although a manufacturing corporation cannot engage in humanitarian works as its principal business, the fact that it is organized for profit does not prevent the existence of implied powers to carry on with humanitarian motives such charitable works as are incidental to the main business of the corporation."

My primary problem with your position is not that it is factually wrong (even though it is), but that "maximizing profits" is a purely subjective term and an impossible goal. Short-term and long-term profits have mutually exclusive components. For example, cutting r&d or laying off staff raises profits in the short term, but may lead to declining profits in the long term. Depending on your point of view, any corporate action could be construed as not maximizing profits.

What?

[Anonymous Coward]

Before the flooding, I bought a 1TB drive for ~$85. During the flooding, I saw those jump to ~$135. Last week, I bought a 1TB for $70.

They're still high?

But SSD prices failing every week

[Anonymous Coward]

Good old mechanical hard drives will be around for a long time but at least the flood sparked some serious competition with pricing in the SSD market.

They're not coming down

[thetoadwarrior]

I feel sorry for the people who think prices will go back to what they were.

Lack of competition, recapitalization

[Giant Electronic Bra]

I think it is just a sign that the market is no longer really competitive. There are too few vendors left in the business (basically what, 3 actual manufacturers are left now at this point).

Frankly I doubt this is going to continue for long. With more and more storage moving online (much more efficient use of drives on average), less desktops, movement of desktop and laptop storage to SSDs with falling SSD prices there is just not going to be the demand long-term. In fact the increased prices right now may just represent a need for these businesses to recapitalize and drive R&D. The only justification for hard drives is going to be sheer size (IE mb/$, mb/m^3, mb/watt) and that requires a lot of R&D to keep driving those numbers in a positive direction.

Re:Lack of competition, recapitalization

[Solandri]

I think it is just a sign that the market is no longer really competitive. There are too few vendors left in the business (basically what, 3 actual manufacturers are left now at this point).

Arguably, the state of the HDD industry before the flooding was that it was too competitive. It had some of the lowest margins in the tech industry, resulting in big research names like IBM deciding it wasn't worth it and jettisoning its entire storage division (sold it to Hitachi, who after a decade decided the same and sold it to WD).

So the pricing we're seeing now may actually be closer to where prices should have been for a thriving industry. We're not down to 2.5 manufacturers (Toshiba doesn't make 3.5" drives) because of some grand conspiracy to corner the market on HDDs. We're there because HDD prices were too low for all the other manufacturers to stay afloat, resulting in them merging and being acquired. The extremely low margins meant the process overshot, and there are now fewer manufacturers than you'd expect in a healthy industry.

Sometimes Companies Never Recover

[carrier lost]

It's quite possible that there might have been some HDD or sub-assembly mfgrs who were just hanging on, what with the constant shrinking in the desktop market.

The flood might have just pushed some of them over the edge, so to speak.

Inflation

[hackus]

If you are pricing the hard drives in Federal Reserve notes, you are going to find that although the floods did have a market response to prices, something has also happened in the past several months.

The Federal Reserve Note is dying. Purchasing power of the dollar is being cut drastically in just about all areas not just hard drives.

I doubt it will improve any time soon. One use to be able to track gold and silver to get a pretty good guess on the health of a fiat currency. Now, that is pretty much impossible to do due to the enormous amount of corruption in the exchanges going on during the past several years since the crash.

In fact I would expect the prices to not return to last years levels, and actually increase like many items that are currently doing the same thing.

-Hack

Re:Inflation

[Anonymous Coward]

Which inflation metric is that? The bogus official number that excludes Food, Energy and housing? The 3 things that everyone cares about.

Re:Inflation

[Maltheus]

Throughout most of America's history there was hardly any inflation at all. Now, you'd be hard pressed to find a food or energy product (necessary basics) that hasn't doubled in price over the past 10 years.

The CPI calculations were so heavily rigged by the Carter and Regan administrations, that they no longer have any basis in reality.

Its the economy

[randomErr]

In the US we has some thing called QE2 and QE3. QE stand for Quantitative Easing. The practice is to have a central bank but up assets of a failing companies and print money to pay for it. Printing the money causes inflation. This probably is the easiest way to explain was inflation.

Our money is worth less now. So it takes more cash to buy the same amount of goods. The cost is compounded by other factors like shipping and labor.

Unfortantley for the United States QE3 is now unlimited. QE1 and QE2 both had ceiling so we could only cause so much inflation on ourselves. But with QE3 our central bank, The Federal Reserve, has an unlimited ability to print as much money as it wants.

a page from the oil companies' book

[technosaurus]

Its a pretty simple strategy. Buy out as much of the competition as possible to help control supply. If anything causes increased demand or short supply, raise prices immediately and then only lower them when absolutely necessary to keep regulators off your back. Does this sound like gas prices? I think so. Remember when diesel prices were lower than gas at least all summer? It may not be a monopoly, but when a few major companies own the market and have an unwritten non-compete agreement, it may as well be (recall a similar issue the lcd monitor price fixing case)

Re:Yes, accurate.

[alen]

not collusion but more like why spend all this money to rebuild a factory or bring a flooded factory to 100% of pre-flood capacity if the prices will only drop?

they rebuilt enough capacity to just meet demand and that's it