Want a so-much-needed hard drive upgrade? BEST advice for 2012: DO IT NOW!
Want a so-much-needed hard drive upgrade? BEST advice, for the year 2012: DO IT NOW!
The recent flood in Asia, has halted the production line of hard disks, for many hard drive manufacturers. This, combined, with the dollar going up; disks will be getting more expensive and will most probably increase with an average of 50%; as long [product availability < demand] towards a distributor. Distributors make their profit by buying larger bulk, while selling smaller bulk with higher marges, towards the retail sector. When a order cannot succeed, because of a products inavailability; the distributor will charge higher margins; creating a (temporary) domino effect in cost, straight towards the end-user. The distributor can only sell cheap, when the import price is cheap; which depends on the amount of available quantities.
The price will only regulate, when [product's demand < product's availability]. Less quantities are charged with a higher profit margin, to keep the flow of import/export running.
- All hard drives, will increase in price on global level, by an average of about 50%; which can be seen in the table below.
- This margin, caused by understock/no availability Increases the total price for external, assembled systems and laptops. [1]
- According the media (tv), the increase in price will be only around 15-20%; which is to me, a very unrealistic guesstimate;
- Lower margins are only granted, by a distributor, when the stock and availability of a product is high; to be sold in larger quantities.
If you want to upgrade your raid station; PC; external hard drive or network drive; this is the best time for the best value. It won’t get cheaper, for a long period!
If you live in Belgium, you have to consider fast, how and where to get your purchase, because of the recent introduced “Auvibel” tax; which has more details here [2] and here [3].
Q: For how long will this period last?
This trend usally keeps on for a longer period; till losses are regained, backorders are complete, contracts maintained and the availability of stock is fixed. This is not the fist time, when computer components raised in price; mostly, this happens with the dollar. This has happened several times, in the past with memory, disk drives, cpu’s and hard disks. Even the biggest companies like Intel, IBM and Dell has to deal with the aftermath of these disasters, essentially getting a huge shortage, big lists of backorders, halting projects, ever-waiting customers, contract breaches and stock shortages.
As long, the dollar keeps rising and stocks are maintained thru backorders; this price won’t change. Distributors buy large quantities of disks at current dayprice. If these quantities are not sold; the stock will be sold, at minimally, the price which was paid for that particular batch of disks at that day; before cheaper batches will be bought, dropping the price eventually towards the end-user. This process can take a while; depending how long backorders take, and, how long these disk-manufacturers need, to get back in full production status. The shortage of disks for several manufacturers, automatically raises the price and the length of period needed, before neutralizing again to normal market standards; although; a shortage of rare-earth materials might fix this current price for an entire while longer!
Q: How much does this shortage, affect the price?
The differences is quite noticeable, especially when ordering multiple disks (for server, nas drives, raid stations, …).
Prices at several of my distributors, changed over a few months, but, are based on distributors prices, round up.
These calculations show that hard drives, will increase in price, with an average of 50%; end-user price.
| P r o d u c t  I n f o r m a t i o n |
r e t a i l  p r i c e [end-user] (21% vat in) |
total price |
Quality & |
| Brand & Size |
Specifications |
before shortage |
after shortage |
change (%) |
(Warranty) |
| WD Green; 1TB |
SATA 3Gb/s 64MB cache 5400RPM |
ret 56 € |
[ok] ret 160 € |
ret +104 € (+65%) |
consumer (2y) |
| WD Green; 2TB |
SATA 6Gb/s 64MB cache 5400RPM |
ret 80 € |
[ok] ret 202 € |
ret +122 € (+61%) |
consumer (2y) |
| WD Green; 3TB |
SATA 6Gb/s 64MB cache 5400RPM |
ret 152 € |
[na] ret 207 € |
est +56 € (+26%) |
[n/a] not available |
| WD Blue; 1TB |
SATA3 6Gb/s 32MB cache 7200RPM |
ret 80 € |
[ok] ret 163 € |
ret +83 € (+51%) |
consumer (2y) |
| WD Black; 1TB |
SATA 6Gb/s 64MB cache 7200RPM |
ret 84 € |
[na] est 130 € |
est +47 € (+36%) |
[n/a] not available |
| WD Black; 2TB |
SATA 6Gb/s 64MB cache 7200RPM |
ret 152 € |
[ok] ret 305 € |
ret +152 € (+50%) |
enterprise (5y) |
| WD RE4 (Raid); 1TB |
SATA 3Gb/s 64MB cache 7200RPM |
ret 119 € |
[na] est 202 € |
est +84 € (+42%) |
[n/a] not available |
| WD RE4 (Raid); 2TB |
SATA 3Gb/s 64MB cache 7200RPM |
ret 198 € |
[na] est 279 € |
est +82 € (+29%) |
[n/a] not available |
| Seagate Green; 1TB |
SATA 3Gb/s 64MB cache 5400RPM |
ret 59 € |
[ok] ret 136 € |
ret +77 € (+57%) |
consumer (2y) |
| Seagate Green; 2TB |
SATA 3Gb/s 64MB cache 5400RPM |
ret 80 € |
[ok] ret 190 € |
ret +111 € (+58%) |
consumer (2y) |
Additional details with these calculations:
When comparing the change in price; most of the hard drives have raised, between 50% to 65%, calculated at distributor level. The older stock of retail stores is set between 26% to 42%. Red numbers indicate a less-realistic margin; mostly based on older stock.
- the period “before shortage” is a snapshot of (the past) september, 2011; with 21% tax;
- the period “after shortage” is a snapshot of (the present); january, 2012 ; with 21% tax;
- all prices are indications for end-users; calculated with a profit margin of 15%; which is a common margin for computer hardware in a store;
- [ok] = Enough stock available; the retail price is based on the usual profit margin, used in retail (end-user) stores.
- (ret) = the retail price, calculated with regular profit margins for products available in stock. This value is the most realistic.
- [na] = shortage; with backorders. The import price is unknown, when not available thru the distributor. The import price depends on the daily price of the manufacturer.
- (est) = an estimate price; the average, calculated over 10 different retail stores from Belgium. Some estimates will most likely double in margin, after new stock is ordered.
I choose a disk, with high reliability, offering the best data integrity; quality above cost which mostly means more warranty and less failures. My primary choice is WD, for over 15years. WD has the lowest failure/return rate, of all the brands i’ve used.
This steep increase in price, will affect end-user products, sold in shops through Belgium, to retain a minimal profit margin. External disks, but also PC’s, laptops and network drives will be affected by these margins. Many PC stores are currently selling assembled systems, with more expensive components, to disperse/mask the total cost of ownership; keeping the profit margins as high as possible.
When there is understock, the demand will be higher than the possible availability of stock [product demand > product availability]; increasing the margins towards a distributor which will increase the price towards the retail sector. Distributors only survive, by buying in very large quantities at very low profit margins between factory and distributor; so they can be sold towards the retail sector in smaller quantities with a higher margin.
The margin between distributor and retailer is very dependent on the availability of a product vs demand. A retailer might pull down it’s prices for a temporary moment, with less profit as result. When the availability gets higher than the demand [product availability > product demand]; the distributor gets the opportunity to buy in larger quantities, creating a window towards the retail sector, demanding much lower quantities. [4]
In short:
- demand > availability : product cannot be bought in large quantities by the distributor, resulting in a higher bulk price.
- availability > demand : product is available to be bought in large quantities by the distributor, resulting in a lower bulk price.
Q: Are there better alternatives for hard-drives, but Belgium?
Hard drives; unlike CD, DVD, Blueray and other (re)writable disks on the Belgian market; are available globally, with exactly the same quality and type of disk.
Some brands do sell refurbished, A-B-C products; although; this is impossible to prevent, by ordering outside Belgium..
To get quality, best choice will go to the “Enterprise” editions; offering longer warranty periods; better components and longer lifetime. Most of these drives got lower speeds to lower the heat dissapated from the disk; extending it’s life time considerably. For video-editing it’s adviced to have faster spinning drives (7,200/10,000RPM) because of the continues stream of large data. For audio, NAS, network drives, games, normal PC usage and some servers; a disk of 5,400 RPM is sufficient and mostly a better option with a longer lifetime.
There is however, one difference, with the products available outside Belgium; and that’s the price per terabyte; which will only increase every 1/2 to 2 years! [3 - link soon!]
Q: What about warranty terms and the differences in quality?
Western Digital & Seagate is changing the warranty period for their “Consumer” series from 3 years, back to 2 years. Only the “enterprise” models will be left with an extended warranty period. [4]
These companies claim it has nothing to do with the floods; although; the math is simple; when you know the price of a full production stop is enormous and an instant loss; till the production can start again. The scarcity of hard drives is not over, at the time of this article, many types are still unavailable for a longer period; because of backorders of hundreds of distributors, retailers and users; worldwide. This loss cannot be recovered because time cannot be turned back and production plants have to be in working order before supply can meet the demand. I do personally understand, these companies can’t supply more than they got in spare stock.
No production means no adding at this spare stock; warranty cannot be garanteed with the same quality; because not all products are available or in heavy understock. Consumer products will decrease in warranty length while professional/critical users can be garanteed a repair, for as long these products are available in their warranty/rma stock to switch. Often these stocks do contain refurbished disks; to keep the supply of products fresh when new and the after-sales of products refurbished, when under warranty. Refurbished disks are mostly disks with a replaced or fixed component; with the reliability of a retail hard-drive. I’ve had only one refurbished going dead; while I had more retail disks giving the pipe to Maarten…
Q: Are there any signs of details which might affect the working period and quality of a disk?
Based on more than 20 years of experiences with hardware, networks, storage and servers; clicks of death and fatal crashes; is to avoid ANY hard drive, which has been produced, between July and September.
I’ve had nothing but troubles with batches of any brand, year or size made in the holiday seasons. I’ve recently also got a confirmation from a distributor, which told me personally the reason of those bad batches in the holidays.
Q: How stable is the current hard-disk production at the source?
In july, 2011, Seagate has published their statements; but also a very interesting fact; where the material used in their hard-drives is getting more expensive, also, because the demand of Dysprosium (Dy) was higher than which could be supplied from China. A hard drive contains 2% of these magnetic earths and the margin has shifted by 20%. [6]
China’s exports are being restricted and we’ll very soon be looking upon a shortage of rare earths; probably this year and next. This means; the overall cost for production will be higher; margins will be smaller and disks will get more expensive. Seagate depends on their supplier, Molycorp to produce their hard-drives. [5] Dysprosium is used in two sub-assemblies, containing rare-earth permanent magnets (REPMs); which are deemed critical for the functioning of their harddrive. Without those materials, the spindle motor and voice-coil actuator cannot be build.
These rare-earth materials will rise in price, as soon there are shortages. With this current flood, we’re dropped into an economic climate, where companies need to do everything to get their production plant running again; because every minute of silence is a minute of heavy financial loss. I am afraid, the stability or price of the hard-drives will not drop for atleast a year or two; till these shortages have been dealt with; or no production will be possible. [7]
The price of computer hardware is a tight chain which starts at raw materials and ends at the end-user. The chain of computer hardware/margins starts at the factory delivering raw materials and ends at the user. There are atleast six chains, and each link requires a minimal profit. Sum all these margins together and you’ll end up at the final “marginized” end-user price.
When the first chain in production; would demand, for example a +5% margin because of naked shortages; disks would automatically raise in price by about 10%; because every next link, in this chain, has to pay the margins demanded, by the supplier in the previous link. The production plant can lower its margin, as soon, as supply is higher than demand. The manufacturer pays production costs; also with margins. When newer technologies, alternative materials or other rare-earth sites are discovered; the margin will be lowered again for this entire chain.
Supply and demand is the only reason why electronic products are cheaper than in the past; because the production of these devices has been automized, symplified and optimized towards mass production. Years ago, electronic devices were soldered by hand; which caused these products to be very expensive; because the profit margin was too low with this handwork. As long the extraction of raw materials, keeps running at a steady pace with a fixed profit margin and the production plants keep producing at maximal quantity; these products will be cheap. As soon as the chain of production fails or is broken; the chain of distribution will pay the final bill; ending with you, the end-user.
chain of production: raw materials > production plant > Manufacturer
chain of distribution: Manufacturer (export) > Distributor (import) > Retail > End User
Q: Where can I find more information about these topics?
I hope, you had an interesting read about the internal kitchen of production towards distribution, and, understand the current raise in prices; since everyone gives and needs a part, because everyone has a bit of work to get the final product delivered to the end-user or customer. Profits are very shallow for distributors and will in turn get shallow for the retailer. The retailer doesn’t decide the “minimum” price of a product but the entire production & distribution chain does fix a minimum; where the retailer can add his margin; acceptable for his/her clients.
Don’t expect your disks to be a lot cheaper, in the shop around the corner, because, the initial problem lies (almost) at the source …
With the best wishes,
Freaking Wildchild.
[draft v0.8 - uncorrected - article preview]
This article is not finished yet; errors have to be corrected and a dutch translation will be added. Sorry for any spelling mistakes or errors which might have crawled in the page…
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