A Year After Thailand Flooding, Hard Drive Prices Remain High

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A Year After Thailand Flooding, Hard Drive Prices Remain High

Posted by Soulskill on Friday November 9, 2012 @06:03AM from the what-the-market-will-bear dept.

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."

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Why not? by Severus+Snape · 2012-11-09 06:06 · Score: 5, Insightful

If they can get away with charging the extra, they are hardly going to reduce their profit margins now.
1. Re:Why not? by K.+S.+Kyosuke · 2012-11-09 06:23 · Score: 4, Insightful
  
  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.
  
  --
  Ezekiel 23:20
2. Re:Why not? by Nadaka · 2012-11-09 07:07 · Score: 3, Insightful
  
  The market is much less willing to bear arbitrary price jacking than price jacking related to a major event.
3. Re:Why not? by Smallpond · 2012-11-09 07:14 · Score: 3, Interesting
  
  Because the equiibrium was lower. Now one of the few players would have to charge less, but they have no incentive to do so. Game theory at work.
  Exactly. When their costs went up they all had to raise prices but when costs go down they can all wait for someone else to lower prices first. No collusion or cartel is required.
4. Re:Why not? by oxdas · 2012-11-09 07:26 · Score: 4, Insightful
  
  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 counselâ¦ 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.
5. Re:Why not? by hairyfeet · 2012-11-09 07:30 · Score: 4, Interesting
  
  Because they actually had real competition before? Before the flood there were FOUR hard drive manufacturers, Seagate, WD, Samsung, and Hitachi, now there is only WD and Seagate. Since there is only two they will simply watch and match each other's prices, nice way to have a duopoly.
  But this is why competition is so important, just look at how quickly prices are falling and sizes growing in SSDs whereas with HDDs they seem to be stagnant, that's because as long as they simply match each other's prices they don't have to worry about price wars since its only the two of them.
  
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6. Re:Why not? by cranky_chemist · 2012-11-09 09:10 · Score: 4, Informative
  
  It's called "static up, elastic down" pricing, and it's one of the basic tenets of economics.
Re:What? by Anonymous Coward · 2012-11-09 06:16 · Score: 4, Informative

You overpaid pre-flood. Pre-flood, you could get 2TB 3.5" 7200RPM for around $60-$70. Now it's about $90-$100 and usually with a shorter warranty duration than pre-flood.
All I'm gonna say is these higher prices better result in the new technologies (HARM/BPM/etc) coming to market.
They're not coming down by thetoadwarrior · 2012-11-09 06:22 · Score: 4, Insightful

I feel sorry for the people who think prices will go back to what they were.
Yes, accurate. by DarthVain · 2012-11-09 06:30 · Score: 3, Informative

I bought a 2TB WD for 69.99 pre-flood. They are still about 100$ right now (95.99$). So yeah, 30-35% over what they used to cost.
About the only glimmer of hope is that the 3TB has come down in price to about 130$ (129.99$).
So the 3TB is 0.043 a GB and the 2TB is 0.05 a GB whereas it was 0.035 for a 2TB pre flood.
So in larger format drives it is still approching the older pricing at a somewhat faster rate.
That said, the unwritten rule about just about ANY computer technology is that wait a few months and whatever it is will be cheaper. HD's have bucked that trend due to the flood, and the (all) companies profiteering from it. That is what you get when you have an industry that has consolidated and consolidated until there are only a few companies out there. The BIG question out there is if there is any intentional collusion going on to keep prices high, much like just about everyone suspects of oil, but nothing is ever done.
1. Re:Yes, accurate. by alen · 2012-11-09 07:18 · Score: 3, Insightful
  
  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
Lack of competition, recapitalization by Giant+Electronic+Bra · 2012-11-09 06:32 · Score: 4, Insightful

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.

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"Malo periculosam, libertatem quam quietam servitutem." -- Jefferson
1. Re:Lack of competition, recapitalization by Solandri · 2012-11-09 08:07 · Score: 4, Insightful
  
  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 by carrier+lost · 2012-11-09 06:35 · Score: 3, Insightful

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.

--
XKCD:Xeric Knowledge Comically Dispen
a page from the oil companies' book by technosaurus · 2012-11-09 06:45 · Score: 4, Insightful

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:What? by Anonymous Coward · 2012-11-09 06:50 · Score: 3, Interesting

If it's a Seagate 7200.14 then no, they're not the same.
The variant they put in external enclosures is crippled via firmware to 150MB/s max transfer rate and has ~24ms average access time.
The noncrippled ones do >200MB/s on the outer cylinders and ~18ms avg access time.
Re:Inflation by ShanghaiBill · 2012-11-09 06:54 · Score: 4, Informative

The Federal Reserve Note is dying. Purchasing power of the dollar is being cut drastically in just about all areas not just hard drives.
Inflation is very low by historical standards. Since the floods, the dollar has been flat against the baht and yen, and has risen against the euro. We haven't been doing quite as well against the Swiss franc, but we don't buy HDDs from Switzerland.
Also warranties suck now by citylivin · 2012-11-09 06:55 · Score: 5, Informative

I have also noticed that you are paying a huge premium now for even a 3 year warranty. Most seagate drives now come with a ridiculous 1 year warranty on them, so I wont even look at them any more. WD is not much better, with their green drives being 1-2 years. If you want 3-5 year you are paying 50% more for the drive. For example a 2tb WD black (5 year warranty) has a non sale price of $199 ( http://www.ncix.com/products/?sku=58376&vpn=WD2002FAEX&manufacture=Western%20Digital%20WD&promoid=1230 ) whereas the same drive albeit "green" with a 2 year warranty is $119 non sale price ( http://www.ncix.com/products/?sku=62047&vpn=WD20EARX&manufacture=Western%20Digital%20WD&promoid=1230 ).
Its a shame because I was looking at old invoices and in 2010 I was buying 2tb drives with 3 year warranties standard for 80 bucks.
Sure they claim to have more "features" with their different colour codes, but it does seem like they just decided 3 years should no longer be industry standard for a warranty. Probably some sort of collusion as they all pretty much changed their warranties at the same time. With seagate, they used to pride themselves in having 5 year warranties. And having recently RMA'd a 1TB drive from 2008, I am glad for that.
Most HDD's die within 3-5 years. So a 1 year warranty is useless except for straight off the truck failures. Arguably, this is more sensible for the company, however it sucks ass for consumers who are used to having a standard 5 year warranty, an artifact of the storage wars of the mid aughts.
So I am not surprised, but not many people are talking about this, which is surprising. Glad to see a slashdot article about it!

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1. Re:Also warranties suck now by gman003 · 2012-11-09 07:20 · Score: 4, Informative
  
  There's more difference than just the warranty between the Green and Black.
  WD has three "labels" for consumer drives: Green, Blue, and Black. Green drives are 5400RPM "power-efficient" drives, and new capacities generally show up here first as it's easier to increase density at low speeds. Blue and Black drives are both 7200RPM*, but Black usually has larger cache and is marketed at "enthusiasts", while Blue is aimed at "mainstream".
  So I guess they also consider a lengthier warranty to be an "enthusiast", not "mainstream", feature.
  * I think on their mobile side it's different, with notebook Blue drives still being 5400RPM, but I don't recall for sure and don't feel like checking.
2. Re:Also warranties suck now by MozeeToby · 2012-11-09 08:57 · Score: 3, Informative
  
  There is now also "Red" which have some NAS features and a 3 year warranty.
Re:Pine for the old days... by hjf · 2012-11-09 07:05 · Score: 3, Informative

I'm 100% certain Facebook and Google don't need the RAW SPEEDZ 10k SAS gives, but the sheer size and small price of 3.5 SATA
Re:Its the economy by ShanghaiBill · 2012-11-09 07:12 · Score: 4, Informative

Our money is worth less now.
No it isn't. Most HDDs are made in Japan and Thailand. Since the floods, the dollar has not declined against either the yen or baht. US domestic inflation is very low, and Japan has actually had deflation (negative inflation) since the flood. So a dollar should buy more, not less.
Re:What? by AliasMarlowe · 2012-11-09 07:14 · Score: 3, Informative

I bought a pair of WD 3TB drives just before the flood. They cost me about euro 125 each, and the cheapest price hereabouts today is almost euro 140. Note that these prices are not exactly comparable to the US prices, due to currency exchange and high VAT.

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Those who can make you believe absurdities can make you commit atrocities. - Voltaire
Re:Its the economy by TopSpin · 2012-11-09 07:27 · Score: 4, Interesting

QE3 is $40E+9 per month. Helicopter Ben is monetizing (printing) about 37% of our deficit. This eventuality has been predicted for the US for decades. Buy gold with cash and hide it.
However, that's probably not the reason for the pricing histogram in the linked story. The prices of some models have fallen while others have remained high. That differential wouldn't exist if it were exclusively due to currency; exchange rates make no distinction between popular 2.5" disks and everything else.
The models where prices have fallen are the high volume models that OEMs install in laptops and DVRs. Everything else remains expensive.
That actually makes a lot of sense. OEMS buy those 2.5" drives under contract in large quantities. These are the lines that got highest priority to recover after the flood, so the supply of these parts recovered quicker and prices have fallen faster.
Basically the flood caused a realignment of resources and this is reflected in the prices we see now.

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Lurking at the bottom of the gravity well, getting old
Kryder's Law actually by Comboman · 2012-11-09 08:19 · Score: 4, Informative

What does Moore's law have to do with this? There are not a large number of transistors on the hard drives they are talking about here.
The equivalent for hard drive storage is Kryder's Law, but the concept is essentially the same as Moore's Law.

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Re:Its the economy by Anonymous Coward · 2012-11-09 08:25 · Score: 4, Funny

But that doesn't fit his distrust of The Federal Reserve! How dare you provide real facts!
Re:What? by Applekid · 2012-11-09 09:29 · Score: 4, Funny

You're all overpaying. I stole all my hard drives.

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More Twoson than Cupertino