Prices of Hard Drives to Return to Pre-Flood Levels Only in 2014

From X-bit Labs: Although production of hard disk drives (HDDs) is rapidly recovering from the catastrophic Thailand floods that occurred in October, HDD average selling prices (ASPs) are not expected to decline to pre-disaster levels until 2014, according to an IHS iSuppli. The two main reasons to keep pricing of hard drives at high levels are consolidation on the market of HDDs as well as long-term supply agreements between suppliers and clients.

In the wake of the floods, the ASP for the entire HDD market soared to $66 in the fourth quarter of 2011, up 28% from $51 in the third quarter. The ASP held steady at $66 in the first quarter, and is expected to decline marginally to $65 in the second quarter. Apparently, the prices will remain on those levels for years to come.

Meanwhile, after flooding caused a 29% plunge in shipments in the Q4 2011, HDD production is rising and will recover completely by the third quarter. Shipments rose by 18% to 145 million in the Q1 2012 and by 10% to 159 million in the Q2 2012. In the third quarter of 2012, shipments are expected to rise by another 10% to 176 million. This will mark the first time in 2012 that shipments will exceed their 2011 quarterly levels, up from 173 million in the Q3 2011. Despite exceeding pre-flood shipment levels in the third quarter, pricing is expected to remain inflated.

“HDD manufacturers now have greater pricing power than they did in 2011, allowing them to keep ASPs steady. With the two mega-mergers between Seagate/Samsung and Western Digital/Hitachi GST, the two top suppliers held 85% of HDD market share in the first quarter 2012. This was up from 62% in the third quarter of 2011, before the mergers. The concentration of market share has resulted in an oligarchy where the top players can control pricing and are able to keep ASPs at a relatively high level,” said Fang Zhang, analyst for storage systems at IHS.

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