Devastating floods that hit Thailand last October resulted in the shut-down of at least half the country’s hard disk drive (HDD) capacity, around a quarter of global capacity. HDD prices rocketed after the floods. A typical 1TB HDD increased from $60 to $160 in the immediate aftermath of the floods.
Now HDD production is rising and is expected to recover completely by the end of 2012. HDD shipments are expected to reach 176 million in 2012Q3, up from 145 million in 2012Q1.
Despite reaching pre-flood levels HDD prices are expected to remain elevated as production is concentrated in the hands of a few large manufacturers. Two recent mega-mergers between Seagate/Samsung and Western Digital/Hitachi GST has resulted in the two top suppliers holding 85% of HDD market share in 2012Q1, up from 62% in 2011Q3.
HDD prices are down 30% from their peak but they remain almost double the pre-flood levels. Industry consultant IHS forecasts HDD prices will only fall to their pre-flood levels by 2014 prices, remaining at an elevated level in order to fund additional research and development into next-generation storage systems.
How are companies responding? Owing to concerns over HDD availability, an increasing number of PC manufacturers have signed long-term agreements with HDD makers. These agreements provide shipment guarantees, but lock in pricing that is approximately 20% higher than pre-flood levels.