Lots of people seem to have some misconceptions about the flooding in Thailand and the fact that hard drive pricing is going through the roof. There's a
very active thread over at NCIX forum about this, but I thought I'd open up the discussion here as well and see if there's anything I can do to help people understand what's going on and why.
Here's "How the HDD Market Works 101":
Yes, every level of the supply chain will make more than normal on the drives that they currently have in stock.
What about 2-3 months from now when there's nothing to sell? We have to keep the lights on in the warehouse and keep paying people's paycheques regardless. That period of extra margin helps to offset the hard times that are coming.
Our livelihoods rely on making enough money to pay our bills and keep our business running. That means if we foresee a time in the future when a lack of supply is going to hurt us really badly, we would be irresponsible to NOT respond to the changing price of drives in the market.
Here's another thing to consider: Operating cost of a large corporate entity. Do you think that WD's operations will suddenly cost 40% less to run because their factory is underwater? Their sales will be 40% less... How will they keep their business running if they don't charge more for the products that they ARE able to produce?
Another thing I've seen a lot of people say is "Well, Seagate's facilities aren't under water, so why are their prices going up???".
Here's why: With WD mostly out of commission, everyone who would have bought WD will buy all of Seagate's stock. Seagate's production scale is based on careful forecasting and can't be ramped up 40% to compensate for the extra business overnight. They will be just as backlogged as WD in no time! Not to mention that some of the commonly sourced component companies like spindle motors (Nidec) are also under water...
October 28, 2011, 05:19 PM
Hard Drive Pricing Increases Due to Worldwide Shortage 
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