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  • Apr 19, 2014
  • Updated: 11:56am

Hard disk prices seen to stay high

PUBLISHED : Monday, 20 February, 2012, 12:00am
UPDATED : Monday, 20 February, 2012, 12:00am

Prices of hard disk drives are expected to remain high amid a supply shortage in the first half of this year, with industry experts forecasting a full recovery of production to be several months away.

'We are still facing a supply shortage,' Yang Yuanqing, chief executive of Hong Kong-listed Lenovo, said earlier this month. Lenovo is the world's second-largest maker of personal computers.

Heavy flooding in Thailand last year led to a major disruption of the global electronics supply chain. It affected about 14,000 factories which produce various components.

Technology research firm IDC said the disruption caused global desktop and notebook shipments in the fourth quarter of last year to dip 0.2 per cent to 92.7 million from the year-ago period.

Hard disk drive shipments are set to fall 13 per cent in the first quarter of this year, and contract 5 per cent in the second quarter, says market research firm IHS iSuppli.

Shipments dived 26 per cent last quarter, as computer makers relied largely on their hard-disk-drive inventory to support their manufacturing schedules.

'The recovery [of hard-disk-drive production] will be prolonged for at least two more quarters [this year], as supply constraints keep unit shipments from climbing on an annual basis until the third quarter,' said Zhang Fang, an IHS iSuppli analyst.

The global hard-disk-drive market is expected to start expanding in the third quarter, when shipments rise by 2 per cent, followed by a 49 per cent surge in the fourth quarter as the industry recovers.

'Meanwhile, hard-disk-drive prices will remain inflated and inventories will continue to be depleted, showing that demand is exceeding supply,' Zhang said. 'Supply and demand should return to balance by the end of the third quarter.'

Thailand is the world's second-largest producer of hard disk drives after China, and it is also a major supplier of hard disk drive parts.

Thailand's floodings have led to work stoppages at the factories of Western Digital and Toshiba, the world's leading hard-disk-drive makers, as well as at the plants of their components suppliers.

Western Digital, the No1 hard-disk-drive firm, said recently that the inundation of its factories in Thailand would disrupt its supply chain there.

IHS iSuppli estimated that the global average selling price of hard disk drives soared by 28 per cent in the three months to December.

Zhang said Western Digital raised production in other countries and was expected to return to full output capacity by September.

Toshiba has also boosted its output in other countries.

'We have made substantial progress in restoring Western Digital's manufacturing capabilities in the aftermath of the historic flooding in Thailand,' John Coyne, Western Digital's chief executive, said last month.

'While much work remains to be done over the next several quarters to reach our pre-flood manufacturing capabilities, the progress thus far is significantly ahead of our original expectations.'

Western Digital said its production capacity would recover fully in the third quarter. Toshiba's two Thailand plants resumed production last month.

However, IHS iSuppli said that was insufficient to offset the shortfall in production due to the magnitude of the flooding of the factories.

Consequently, the global hard-disk-drive inventory would plunge in the first quarter, it said. And although hard-disk-drive prices are forecast to fall by 3 per cent in the first quarter and by 9 per cent in the next quarter, prices for the rest of this year will remain higher than in 2011, according to IHS iSuppli.

'Prices will remain high for a number of reasons, including the higher costs associated with the relocation of production, as well as higher component costs because of flooding impacts among component makers,' Zhang said.

'Furthermore, PC brands have signed annual contacts with hard-disk-drive makers that have locked them into elevated pricing deals for the rest of the year.'

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