The effects of fall's record-setting flooding in Thailand continue to reverberate throughout the storage industry. The flooding put several factories that made both completed disk drives for Seagate and Western Digital and components like platters, spindle motors and heads under several feet of water for weeks. The estimated production shortfall of 20 to 50 million drives in the fourth quarter has had a significant impact on the storage industry.
The first question I get from users about the drive shortage is how did monsoon season flooding in a country that gets monsoons every year cause the price of a 2-Tbyte disk at Amazon.com to triple? Well, while we users continued to enjoy disk drives whose capacity doubled every 18 months or so while the price remained basically the same, Seagate and Western Digital have engulfed and devoured their competitors, leaving the power pair with more than 80% market share.
At the same time they, and their suppliers, moved much of their production facilities to Thailand to take advantage of low-cost labor. While Seagate and WD managed to save some money when they moved production from Singapore and Malaysia to Thailand, we're now paying the price.
The first place many of us saw the impact was a shortage of drives in the retail channel and on the spot market. The 2-Tbyte drives I bought for $70 in August spiked to $165 around Christmas and are now down to $140, which is still twice the earlier price. Many retail outlets also imposed one- or two-per-customer limits around the holidays.
As all this was going on some of my compatriots in the chattering class wrote that large OEMs had long-term prices built into their contracts, so EMC and NetApp users shouldn't worry about price hikes. Well, they were wrong, as EMC, NetApp and HP have all announced 5% to 25% price hikes for disk drives during the next few months.
Long disk drive warranties have been another victim of the changing hard disk market. Both Seagate and Western Digital have announced that they will no longer offer three- to five-year warranties on their retail products. Some have suggested that this is an indication of a reduction of quality control standards, and that the vendors are offering only one-year warranties as they expect their drives to last only that long.
The truth is, as Hyundai has proven in the auto market, warranties are at least as much about marketing as they are about actually repairing or replacing failed products. With a worldwide shortage of drives, and an essential duopoly in the market, Seagate and WD have realized they can sell every drive they make without the additional cost of repairs for 2- to 5-year-old drives. The warranties drive vendors provide to OEMs are very different than the retail warranties and are spelled out in their OEM agreements.
I expect that smaller vendors like Overland Storage and Nexsan will be squeezed by higher disk prices. Vendors that make bring-your-own-disk arrays like Infortrend, Promise and Drobo should also take a hit as the 100% price hike in the spot market where BYOD array buyers would buy their drives is bigger than the 20% hike the big boys are charging. The guys at Drobo tell me their sales are good as users can start by loading their Drobo with older, smaller drives and upgrade later when prices should come down.
On the other hand, a 100% price boost for spinning drives means that SSDs are now only about 10 times the cost of a spinning disk; they were 20 times the price a few months ago. I'm seeing more folks put SSDs in their laptops. Similarly, I expect an SSD for cache and high-capacity disks will continue to put a hurt on the 10K and 15K RPM drive markets.
I don't expect 2-Tbyte drives to be available for less than $75 again until late this year. Until then, we'll just have to suffer.
Disclaimer: Overland Storage and NetApp have been clients of DeepStorage; Seagate, Western Digital and Drobo have provided hardware for DeepStorage Labs over the years.Howard Marks is founder and chief scientist at Deepstorage LLC, a storage consultancy and independent test lab based in Santa Fe, N.M. and concentrating on storage and data center networking. In more than 25 years of consulting, Marks has designed and implemented storage ... View Full Bio