'Irrational Demand' Causes Price Hikes in Hard Drive Market: News Report

By Ed Silverstein October 31, 2011

Hard drives – such as those made by Seagate, Western Digital, Hitachi and Samsung increased by 40 to 90 percent (if not more) – at online sites in recent days, according to news reports.

InfoWorld which has been monitoring the prices concludes that “consumers, businesses, and IT organizations are getting gouged.”

“Prices are going up all over the world, not just the United States, and they're going up for hard drives of all sizes, not just the big ones,” InfoWorld adds.

 The price increases commenced with the floods that struck in central Thailand. “The flood took out approximately 25 percent of the world's hard drive manufacturing capacity,” reports InfoWorld.

For example, “Western Digital's main plant in Bang-Pa In industrial park was inundated with almost two meters of water,” InfoWorld said. “Toshiba had a hard drive plant in the same industrial park. Nidec and Hutchinson Technologies both had plants that make hard drive parts, taken out in the same flood.”

Predictions are being made that repairing the plants will take “many months,” InfoWorld said.

But even with the flooding, hard drive prices “remained static,” InfoWorld said. Next came many predictions of a “shortage” of hard drives.

This expected price increase comes even though “the number of hard drives being produced right now is likely very close to the number that came off the assembly line before the flood” – with InfoWorld claiming it’s a case of “irrational demand.”

In addition, ZDNet reports that flooding in Thailand led to the closing of 14,000 factories and over 660,000 employees find they are without work. Hard drive shortages are expected to continue into 2012, ZDNet predicts.

In addition, Ben Reitzes, an industry analyst with Barclays Capital, said in a research note quoted by CBS News that "HP and Dell will see higher component prices and shortages. Apple will see the least impact because it uses flash drives for the MacBook Air and iPad.”

"Regarding PC makers, we believe that a prolonged disruption to disk drive production could impact the PC market as well," Reitzes adds in the research note quoted by CBS. "If drive makers remain supply constrained, we would expect PC makers to be negatively impacted from an availability perspective as well as from component pricing increases."

Dell and HP may see lower earnings, and Western Digital and Seagate expect their prices will increase, CBS News adds.

According to an Associated Press report appearing on TechZone360, Thailand manufactures about 25 percent of the hard drives worldwide; it is the second–place manufacturer after China – says data from IHS iSuppli. In Thailand, plants that make a third of the nation’s hard drives were closed after the flooding, TechZone360 adds.

Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Rich Steeves

TechZone360 Contributor

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