Just under a year ago, massive flooding in Thailand turned the PC industry on its head for the simple reason that a huge proportion of the world’s hard drives (and the components that go into them) are manufactured there. Supplies were cut off for weeks and prices of every type and model of hard drive shot up by around 150 percent virtually overnight. The problem is that even though factories were restored and supplies resumed within weeks, hard drive prices have still not come back down to where they used to be.


In mid-2011, it was possible to buy a standard 1 Terabyte internal WD or Seagate drive for Rs 2,600. Prices spiked suddenly in the middle of October, and by the end of the month dealers were reporting that there was no stock of any model, though some were allegedly hoarding precious drives and selling them at fantastic margins. Supplies trickled in over the next few months, with the same drives selling for over Rs 7,000. The first major relief didn’t come till at least March 2012, and today the price is around Rs 4,500 if you’re lucky.


The dramatic spike and unsatisfactory fall in prices, as tracked by Camelegg.com

The dramatic spike and unsatisfactory fall in prices, as tracked by Camelegg.com

At the time that hard drives became unbelievably expensive, it was easy to believe that shopowners were sitting on stockpiles of a suddenly rare commodity, charging whatever they felt they could get away with. However true that might have been, the situation was the same all over the world. Retailers were simply out of stock. The situation is much improved now, but nowhere near what it was.


Which is why it’s infuriating now to read reports that both Seagate and WD have earned record profits over the past year and that global drive shipments are back to their pre-flood levels. Just a few days ago, industry-leading analyst firm iSuppli described the industry as “fully recovered”, and described shipments in 2012 as “the highest shipment figure on record”. That figure, most notably, is only 4.3 percent higher than last year’s: 524 million units vs 502.5 million last year. Also according to an earlier iSuppli report, average hard drive prices are 28 percent higher than they were last year and probably won’t fall to pre-flood levels before 2014.


So where was the shortfall? Where was the drastic reduction in supply? The numbers are averaged out over a year and, no doubt, there was a disruption at the time of the flood. It seems as though it wasn’t just the endpoints of the supply chain, but the manufacturers themselves holding out for better pricing. Two major factors are at play here: first, there are only two dominant hard drive manufacturers in the market today, as opposed to at least five a few years ago. Second, large PC vendors buy millions of drives at a time, and are more willing to pay higher prices or revert to lower capacities in order to keep their businesses running.


When the crisis first hit, PC and laptop manufacturers were left with thousands of units that couldn’t finish their way through a production line because there were no hard drives to pop into them. Stockpiles of other components started depreciating because of the delay, and even when there were limited drives to go around, they dramatically drove up the products’ final cost. Plans created years in advance were thrown into disarray. To compensate, vendors swapped out 1 and 2 TB drives with 320 and 500 GB models. By buying in massive quantities and disincentivising competition, things have swung in favour of the drive manufacturers.


The current state of consolidation of hard drive manufacturing. Image credit: Wikimedia Commons

The current state of consolidation of hard drive manufacturing. Image credit: Wikimedia Commons

There have also been accusations of cartel pricing. Now that WD owns Hitachi and IBM, and Seagate owns Maxtor and Samsung, only Toshiba remains a viable, if low-volume, competitor to either.


Beyond our own ever-growing collections of music and video, hard drives power all the gigantic databases behind the online services we use every day: everything you watch on YouTube, every Gmail message you read, every song streamed from Grooveshark, every spreadsheet in your Dropbox account and every image in a Flipkart product listing is stored on a hard drive somewhere in the world, nestled in a data center amongst a hundred thousand other drives. Facebook users upload millions of photos each day. Apple now automatically stores your backups and mirrors your data online. Microsoft wants to sync your files and settings between desktop, phone and tablet. Amazon, Oracle and dozens of others are competing for a slice of the cloud computing pie. None of these things can run without millions and millions of terabytes of hard drive space.


It’s our own demand for digital ubiquity that has created such a lopsided power balance in this particular industry. Solid-state drives aren’t cheap or mature enough to provide enough external competition, but they’re getting there. Everything points to a lack of hope for cheap drives in the near future. The amazingly low prices of 2010-2011 are a thing of the past, and there’s nothing we can do about it. 

Tags: , , , , , , , , , , ,