Discovering the Changing Trend in the Selling Prices of HDDs

The production of hard drives came to a grinding halt when Thailand was struck by a severe disaster back in October, 2011. The catastrophe resulted in a steady increase in the prices of hard disk drives in the fourth quarter (an approximately 28 percent rise). The first and second quarters of 2012, however, saw some decline in these prices (3 percent in Q1 and 9 percent in Q2). This is attributed to the rebounding of HDD production in the early 2012.

The second half of 2012 marked a further increase in the HDD price reaching the pre-flood 2011 levels. This change can be justified by seeing the HDD trend in demand and supply that broke out immediately after the Thailand flood and continued till 2012. Additional costs were incurred by the relocation of production and a rise in the price of HDD parts due to flooding. To add to that, the agreement between major hard drive manufacturers and PC brands caused these prices to remain at much higher levels (compared to the average selling prices in 2011).

The selling prices of hard disk drives do not always narrate the exact market scenario as they are dependent on a number of other variables, such as product performance, seasonality, and the like. Western Digital Corp. (WDC) was severely affected by the Thailand disaster. As a result, the HDD manufacturer migrated operations to other locations. Currently, the company is focused on limiting its HDD production in order for keeping the selling prices at fixed levels. Realizing the tradeoff between demand and supply, the company is aiming at revamping its production strategy and making the process economically efficient.

Seeing the prices slowly moving back to their historic levels, it turns out that the manufacturers are diligently fixing these prices to improve their cost structure. Whilst the HDD prices have leveled off, we do not see the same improvement in storage capacity.