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Hard Drives to Get Scarce
Walter Salm, Editor
This has been a year of horrendous natural disasters — particularly in the Pacific Rim areas. The enormous earthquake and tsunami that demolished critical areas of Japan has been well documented. We still see frightening TV news stories about the demolished nuclear power plant. One result of this has been a revisiting of safety considerations at nuclear power plants all over the world, and especially in the U.S. where existing nuclear plants are becoming senior citizens.

The October monsoon floods wiped out a major portion of the world's hard disk drive production in Thailand. This happened because of the concentrated clustering of similar industries that inevitably occurs because of economies of scale and logistics. Before the monsoons, Thailand was the source for 45 percent of the world's HDD production. Major among the companies affected there was world leader Western Digital, whose 37,000 employees have been put out of work until WD's two major plants can be reconstituted. Costly production machinery has been lost to the floods; some of it will be reconditioned and recommissioned, while other capital equipment will have to be replaced. In addition, many parts sources that make up the infrastructure have been displaced or shut down. WD has lost 60 percent of its total production with the Thailand monsoons. While the balance of its HDD production, located in Malaysia, has not been affected, the company is trying to squeeze some additional production from those plants.

This is not something that will be fixed next week; it's going to have a long-lasting effect on the market and is already causing increased prices not only on HDDs, but on computers as well. Rebuilding and reconstituting the lost HDD capacity will be a matter of many months if not a year or more. and even then, it will be quite awhile for the market prices to start finding their pre-flood level.

It's certainly a good time to postpone upgrading a hard disk drive, provided you have a sufficiently robust backup system in place. If you already have enough HDD storage available to meet your immediate needs, you're lucky.

Still, it's hard to judge prices, since as we went to press, you could still go online and buy a Seagate 2TB external HDD for $99. There were other, similarly low special sale prices at my personal favorite site for such purchases: newegg.com.

One of the industry's old horror stories still remains in the wings to haunt those of us old enough to remember. Back about three decades ago, there were severe shortages of the most popular, new and highly complex ICs. Many of these were on allocation and wait times were typically six to 12 months — an unconscionable length of time if you wanted to get a product into production. OEMs typically would order these products from several sources — distributors as well as the IC fabs — at the same time, hoping that at least one of them would deliver early enough to help speed the new product's time to market.

The result: Distributor "A" would deliver in four months, and the customer would cancel the other orders, maybe not as expeditiously as the situation called for. Suddenly, the product was available in huge surplus quantities from Distributor "B", "C" and "D" with a truckload of the stuff coming down the pike from the fab itself a few months after. This huge surplus suddenly depressed the price for the commodity and the once shortage-driven market was suddenly swimming in overstock product, resulting in a nasty downturn in the IC market. There were several pendulum swings like this, causing several manufacturers to either close their doors or move their operations overseas. Can this situation happen with the current shortage of HDDs? Possibly, but this shortage is caused by a natural disaster, and it's going to take quite a while for these producers to get back to where they were a year ago.

In any event, December is a tough time to gauge market trends for consumer electronics. Everybody has got stuff on sale; you can even buy data storage at your local drug store. After the Holiday rush settles, and the post-holiday sales are finished, new market prices will probably re-establish themselves. That's when the fallout and the shortages will begin.  

 
 
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