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

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.

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