Hard drive prices skyrocket

Prices have shot up 90 percent or more in the wake of flooding in Thailand, not because of shortages but in response to irrational demand

In the past few days, the price of big-name hard drives -- Seagate, Western Digital Hitachi, Samsung -- at major online retailers has shot up 40 to 90 percent or more.

Whether the profiteering can be attributed to manufacturers, distributors, or retailers is unclear -- the middlemen don't post their prices -- but consumers, businesses, and IT organizations are getting gouged.

After reading about sporadic hard drive price increases all over the Internet, I tried a simple experiment late Sunday night. I went to Pricewatch and looked at the best prices for 2TB SATA hard drives. Here's what I found.

The No. 1 choice, a Seagate Barracuda 6Gbps drive from MCM Electronics, was listed at $92.39. According to Pricewatch, the ad was "updated 1 day ago." Clicking through to the MCM Electronics site, I found the drive was out of stock, but alternatives were offered via WinBuyer. There I found the same drive at TigerDirect.com "in stores only" for $139.99, or online for $165. Bottom line: "1 day ago" the drive was offered at $92.39. Today you have to either walk into a store and pay a 50 percent premium over the advertised price, or order online and pay an extra 80 percent.

The No. 2 choice at Pricewatch: a Western Digital Caviar Green 6Gbps, for $104.95 from PC Connection Express. That ad was "updated 2 days ago." But if you click through to PC Connection Express, the same drive is listed for $149.95. That's a bounce of 43 percent.

No. 3 at Pricewatch: WD Digital Caviar Green 3Gbps from GoHardDrive.com, listed at $109.95 "updated 1 hour ago." Click through and GoHardDrive wants $209.99 for exactly the same drive, up 91 percent.

Prices are going up all over the world, not just the United States, and they're going up for hard drives of all sizes, not just the big ones.

What's happening?

Of course, it all started with flooding in central Thailand. I wrote about that two weeks ago in my Tech Watch post "Impending hard drive shortage -- and possible price hikes." Western Digital's main plant in Bang-Pa In industrial park was inundated with almost two meters of water (you can see pictures on Scan Computers International's Facebook page). Toshiba had a hard drive plant in the same industrial park. Nidec and Hutchinson Technologies both had plants that make hard drive parts, taken out in the same flood. Nidec has an alternate plant outside the flood zone. Hutchinson has said it will shift production to the United States and fill orders from existing inventory.

The brunt of the flood has since flowed south -- Bangkok saw horrendous flooding through the weekend, with more than 380 dead and 2.4 million people affected. But the water remains in central Thailand, and it will take weeks just to get the water out. Repairing the facilities and replacing the equipment will take many months.

The flood took out approximately 25 percent of the world's hard drive manufacturing capacity -- but that isn't the whole story.

Western Digital has a second large plant in Malaysia. Seagate doesn't have any manufacturing in the flooded areas. Toshiba makes hard drives in several locations, not just Bang-Pa In. All of the major manufacturers rely on parts supplied by companies that were hit by the floods, but there are alternate suppliers in different locations.

When it comes to making hard drives, the sky isn't falling. Not even close.

After the flood hit, hard drive prices remained static. But then the story expanded, first in the technical press, then in the mainstream press. Two weeks ago, CEO Tim Cook in the Apple quarterly financial call talked about the Thailand floods and called an industrywide hard drive shortage "likely." Western Digital's financial call noted, "We also believe that the industry will be supply constrained due to the flooding in Thailand" and projected a net operating loss for the fourth quarter of the year. Then the financial analysts started predicting shortages.

Hardware manufacturers typically keep four to eight weeks' inventory on premises or in the immediate supply chain, but with an expected softening in fourth-quarter PC sales, some of them had let their stocks slip. They're in the process of locking in hard drive shipments for late this year and early next year.

Where are prices headed? In the short term, almost certainly up. That isn't because of supply: With Western Digital shifted to Malaysian production and Seagate plants running full tilt, the number of hard drives being produced right now is likely very close to the number that came off the assembly line before the flood. There's no doubt that the price increase is in response to demand. How long the irrational demand will last is anybody's guess.

This story, "Hard drive prices skyrocket," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.

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