HDD production may feverishly up and running following the ravaging floods in Thailand, but it could take months yet before supply can approach anything close to normality.
Machinery may have stopped floating down the street, and workers may no longer have to dodge man-eating reptiles on their lunch breaks, but analysts say the overall market is still not in good nick.
A report from IHS iSuppli predicts it will take months for a full recovery in the supply chain. This will continue to keep prices high for consumers, with costs also passing on to PC makers. Intel and HP have previously warned the cost of the disaster has run into billions.
It will take until the third quarter of this year before unit shipments have caught up enough to break into annual growth. Indeed, one of the leading HDD manufacturers, Seagate, also pointed out last week that it could be well into 2013 before disruption to the market is actually over.
Since the devastating floods, supply has been duly constrained with HDD manufacturers and component makers, largely based in Thailand, having to cease production.
Shipments in the fourth quarter fell by 26 percent compared to the same time in 2010, as the floods took full effect. Shipments are expected to decline another 13 percent in the first quarter, followed by a five percent drop in the second quarter.
It is then thought that production will steadily return to growth, with a rise of two percent in the third quarter followed by a massive 49 percent increase as the industry catches up on lost ground.
On a sequential basis, though, the road to recovery is a little more clear. First quarter shipments are expected to increase by 13 percent, following a 29 percent drop off just before, with 14 percent growth in the second quarter, 11 percent in the third and four percent in the final quarter of 2012.
While production is picking up, there are continued concerns over inventory levels which has lead to ballooning selling prices.
According to the report, prices soared by 28 percent as the force of the flooding reverberated down to customers. This caused concerns at the time that HDD prices would continue to increase well into 2012 – as the force of the floods quickly ran down the supply chain.
While average selling prices are expected to drop off from highs at the end of last year, they will remain well above the average for the majority of 2011.
Part of the problem is that PC brands have signed yearly contracts set at the inflated prices which will linger on throughout the year. Mergers between some of the big players, including Samsung and Seagate, will also help keep prices up due to the lack of competition.
Component costs are also a problem – with component manufacturers having to cease production in many cases.
The havoc caused by the floods has convinced manufacturers to begin moving some production away from Thailand to minimise risk in the future.