The Two Ds Be­hind Ris­ing Hard Drive Prices: Dis­as­ter and De­mand

With 599 mil­lion units of hard drives sold in one year, it is clear that the de­mand for hard drives con­tin­ues to grow sub­stan­tially. Com­bine that with man­u­fac­tur­ing fa­cil­i­ties suf­fer­ing from calami­ties and you get a recipe for in­creas­ing prices

PCQuest - - TECH AND TRENDS - — Hiren Mehta

Early last year, the tsunami that struck Ja­pan had a no­tice­able im­pact on the sup­ply of com­po­nents which are used in the man­u­fac­tur­ing of hard drives. And while the floods in Thai­land later that year did not ex­actly hit the fi­nal nail in the cof­fin, they did jointly cause hard-drive prices to rise by a sig­nif­i­cant amount. It is worth not­ing here that in 2011 it­self, Sea­gate ac­quired Sam­sung’s hard-drive busi­ness and in the be­gin­ning of 2012, Western Dig­i­tal did the same with Hi­tachi GST. How­ever, the ex­pen­sive stock bought by dis­trib­u­tors dur­ing the said pe­riod surely has found its way to re­tail shelves now. So why are hard disk prices still not cool­ing down, com­pared to a con­stant drop in the price (per stor­age unit) of al­ter­na­tive stor­age tech­nolo­gies such as Flash mem­ory? Let’s find out.

Tra­di­tional ven­dors do continue to make money

While re­port­ing the fis­cal third quar­ter 2012 fi­nan­cial re­sults half a year ago, Sea­gate Tech­nol­ogy’s Chair­man, Pres­i­dent and CEO, Steve Luczo said: “Sea­gate de­liv­ered strong per­for­mance this quar­ter by con­cen­trat­ing our ef­forts to­wards sup­port­ing our cus­tomers as the re­cov­ery of the hard drive in­dus­try con­tin­ues to progress. Im­por­tantly, dur­ing this chal­leng­ing pe­riod, Sea­gate has suc­cess­fully tran­si­tioned its port­fo­lio to in­dus­try-lead­ing prod­ucts across all mar­kets, thereby po­si­tion­ing the com­pany for con­tin­ued lead­er­ship through op­er­a­tional ex­cel­lence.” The case with Western Dig­i­tal is sim­i­lar. While an­nounc­ing record fi­nan­cial re­sults a few months ago, chief ex­ec­u­tive of­fi­cer John Coyne said “Fis­cal 2012 was one of the most chal­leng­ing and ex­cit­ing years in our 42-year his­tory. While re­spond­ing to two ma­jor nat­u­ral dis­as­ters and com­plet­ing the largest ac­qui­si­tion in the his­tory of the in­dus­try, we achieved year-over-year rev­enue growth of 31 per­cent and more than dou­bled earn­ings per share. In the June quar­ter, the de­mand was in line with our fore­cast as in­dus­try ship­ments reached 157 mil­lion units, bring­ing to­tal HDD ship­ments for the year to 599 mil­lion units. Our WD and HGST sub­sidiaries both per­formed ahead of plan in Q4, de­liv­er­ing great prod­ucts with con­sis­tent ex­e­cu­tion, re­sult­ing in strong rev­enue growth, gross mar­gin and cash flows.”

It’s a mixed story for al­ter­na­tive stor­age ven­dors

SanDisk an­nounced its sec­ond quar­ter 2012 fi­nan­cial re­sults a few months ago. The to­tal sec­ond quar­ter rev­enue of $1.03 bil­lion de­clined 25% on a year-over-year ba­sis and de­clined 14% on a se­quen­tial ba­sis. Be­tween the two un­for­tu­nate events last year, OCZ came up with a PCIe-based hy­brid so­lu­tion, named Revo-Drive, that com­bines both an SSD and the tra­di­tional HDD on a sin­gle add-on card to take ad­van­tage of the re­spec­tive mer­its of each. Oingston Tech­nol­ogy too was quick to re­act to the op­por­tu­nity on hand. In late 2011, it held an event called `Bat­tle of the Ti­tans’ in Hy­der­abad, where it tried to es­tab­lish the supremacy of its SSDs over the HDDs. In­ter­est­ingly though, ear­lier in 2011, just a day be­fore the Ja­pan tsunami, Oingston had is­sued a press re­lease stat­ing that they will fo­cus strongly on SSDs in 2011. That seems to have worked well for them.

So, it can be seen that over­all, stor­age prod­uct man­u­fac­tur­ers, on the back of con­tin­u­ing rise in de­mand, have not been hav­ing a par­tic­u­larly hard time and hence not fac­ing any im­me­di­ate need to dras­ti­cally in­crease sales vol­ume in ad­di­tion to the cur­rent fig­ures, which should ex­plain why the prices are still not com­ing down.

Where can I get the best deal for HDDs?

Deal sites can be a good way of pur­chas­ing hard drives at af­ford­able rates. How­ever, in brick-and-mor­tar stores, it has been found that in cer­tain cases, small spe­cial­ized hard­ware stores of­fer bet­ter deals than bulk sell­ers/ gen­eral su­per­stores. One thing is cer­tain though, it is no longer worth look­ing for PATA HDDs. Also, when you are pur­chas­ing an ex­ter­nal hard drive, do keep in mind that the spin­dle speed of the drive (in terms of rotations per minute) will make just a not­i­ca­ble dif­fer­ence if the drive is go­ing to be in­ter­faced with the sys­tem over USB 2.0. If you can, go for USB 3.0 in­stead. You might need to up­grade your moth­er­board in case it sup­ports only PATA USB 2.0 but the ben­e­fits are worth it in the long run. And since USB 3.0 ports are back­wards com­pat­i­ble, you can use your ex­ist­ing USB 2.0 drives with them.

What ca­pac­ity should I go for?

This is a ques­tion which can be best an­swered based on the per­sonal needs and typ­i­cal us­age, since that should be the top in­flu­encer. Once this is fixed, the other key thing to be kept in mind, es­pe­cially given the high prices, is that while buy­ing a hard drive, your aim is to ac­tu­ally to get re­li­able stor­age space and noth­ing more. This is un­like pur­chas­ing a smart­phone where the smart­phone as a whole is sup­posed to do many more tasks other than save your e.-mails, texts, con­tacts, pho­tos, mul­ti­me­dia con­tent, etc. So, do con­sider the cost per unit of stor­age (such as GBs, TBs, etc.) into con­sid­er­a­tion as well, and not just the ac­tual sell­ing price of the drive. As of now, the `sweet spot’ for get­ting the best deal seems to be 1 TB. This is be­cause 1 TB is nei­ther too large so as to be overly ex­pen­sive to man­u­fac­ture on a large scale, nor too small to be con­sid­ered ob­so­lete in the near fu­ture for typ­i­cal use.

SoH Uave Xou been wait­ing Vince long to buX a UarT TiVkH wait­ing for tUe priceV to come Town? MiT Xou buX a UarT Trive in tUe paVt 1 Xear in Vpite of tUe UigU priceV? Mo let uV know bX writ­ing to uV at pc­queVt@cXber­

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