Hard drive prices remain stubbornly high

It has been more than nine months since Thailand was inundated by the heaviest flooding in the country’s recent history. The disaster took a massive toll on the Thai economy and it managed to affect global markets as well, with one sector particularly hard hit.

In the weeks following the deluge, hard drive prices soared and wreaked havoc on the tech industry. Still, many analysts were rushing to point out that the recovery will be quick and silky smooth, with the situation edging back to normal as early as Q1 2012, as soon as the broken supply chain was patched up. They were wrong. Some even went as far as to predict oversupply problems in the second half of 2012, caused by a flood of hard drives from rebuilt factories. No pun intended.

According to the latest estimates, the HDD industry is making headway and production should be back at pre-flood levels by the end of the year. But even today output is about five percent lower on a year-to-year basis, although estimates vary.

The trouble with many reports is that they focus on overall shipments and wholesale prices, but fail to take into account the retail market and average consumers. For example, at the peak of the crisis, IHS iSuppli reported that hard drive prices had risen by 28 percent and they were estimated to level off and go into decline in 2012. However, some animals were more equal than others. As hard drive makers scrambled to meet their contracts and supply major clients, i.e. leading OEMs, the channel ended up with fewer hard drives, at much higher prices.

So, where do we stand today? Analysts are predicting high hard drive prices throughout 2012 and even 2013. What’s more, the retail market is getting the worst of it. In the weeks and months leading up to the floods retail consumers could pick up a 2TB hard drive for as little as 50 euro or £40. Today retail shoppers are likely to pay twice as much. We compared retail prices for a few WD and Seagate units, over the past nine months, ranging from 1.5TB to 3TB in capacity, in SATA II and SATA III flavours and the numbers are pretty awful to say the least.

Average prices per terabyte hit about 35 to 38 euro by November, up from 25 euro in August last year. The trend continued in early 2012 and average per-TB prices eventually peaked at 50 to 55 euro between late February and April, depending on the vendor and model. However, there are some positive developments. Over the past six weeks prices have started to come down, to about 45 euro, but much like an asthmatic snail with some heavy shopping, they seem to be taking their time.

Sounds like a great time to be in the SSD business, then. Well, yes and no. Although SSD prices are slowly creeping towards mainstream, solid-state drives are still not a viable alternative to spacious and cheap mechanical drives. The gap appears to be narrowing with each passing day. A year ago, a mid-range SSD would have set you back about 1.1 euro per gigabyte, while a hard drive cost 0.025 euro per gig. That made for a ratio of 44 to one, but nowadays the ratio is about 14 to one, as hard drive prices doubled, while SSD prices continued to plummet.

Let’s not even talk about vast improvements in SSD performance with each new generation, and the lack of any noteworthy performance boost in HDDs, aside from traditional increases in density resulting in marginally higher performance and a lot more storage for smut.