Even though Thailand's hard-disk-drive manufacturers are recovering from the devastating floods of October, HDD prices are expected to remain higher than pre-flood levels through 2014.
According to market research firm IHS iSuppli, average selling prices (ASPs) for HDDs increased to $66 in the fourth quarter of 2011, up from $51 in the previous quarter. Prices are expected to decline slightly to $65 in the second quarter of this year.
The floods caused a nearly 30 percent drop in HDD shipments in the fourth quarter, the market research firm reports. Production is increasing, however, and is expected to recover fully by the third quarter of 2012. IHS iSuppli notes in a press release:
Shipments rose by 18 percent to 145 million in the first quarter and by 10 percent to 159 million in the second quarter.
In the third quarter, shipments are expected to rise by another 10 percent 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 third quarter of 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," said Fang Zhang, analyst for storage systems at IHS. "With the two mega-mergers between Seagate/Samsung and Western Digital/Hitachi GST, the two top suppliers held 85 percent of HDD market share in the first quarter 2012. This was up from 62 percent 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."
The floods had such an impact on OEMs that long-term agreements with HDD suppliers have increased, according to IHS iSuppli. These LTAs guarantee shipments of drives and also lock in pricing that is 20 percent higher than pre-flood levels. Further, IHS iSuppli adds:
Even if all the OEMs stop entering into LTAs by the end of 2012, it would take about four quarters with a 6 percent sequential decline in the HDD ASP to reach the pre-flood pricing level. However, given that there have been no consecutive 6 percent sequential quarterly declines during the past three years, the likelihood is remote that this would happen now and that HDD pricing will decline accordingly.
Demand is also expected to keep HDDs lines humming. Local drives, cloud storage, social media, and corporate data storage are all requiring increasing quantities of HDD capacity.