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$1 Billion Short: Hard Drive Shortage Impacts Intel's Q4

By - Source: Intel | B 26 comments

Intel today told investors that the global hard drive shortage caused by the Thailand flood has forced the company to reduce its fourth quarter outlook to a midpoint of $13.7 billion, down from a previous midpoint estimate of $14.7 billion.

Intel's stock was down about 4.7 percent as a result of the announcement. According to the company, sales of PCs will be up sequentially for the quarter, but there are not as many sales into the supply chain as chip inventories are reduced due to the supply disruption in the hard drive industry. Intel expects hard drive shortages to persist through the first quarter and continued improvement of supply during the first half of the year.

There is no consistent opinion from analysts when hard drive supply will be catching up with demand again. IDC, for example, expects some impact to last into 2013, while IHS said that currently added emergency production volumes could lead to a hard drive oversupply by the end of 2012 once the normal production volume is available again.

Several other chip companies were dragged down by the announcement as well. AMD fell by about 4.9 percent, Nvidia by 4.0 percent, Micron by 3.3 percent, Broadcom by 3.1 percent and Texas Instruments by 2.8 percent.

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  • 10 Hide
    seezur , December 12, 2011 11:48 PM
    alidanyea, i believe hdds are the reason, and not ipad and phones over taking a bit of the pc market in a big way, or that people dont need new computers if they have damn near any dual core, and better manufacturing makes parts last longer... i totally believe that anyone who needed a new computer (most sales are from pre built) didnt get one because it cost an extra 20-30$ (the bump that oems have to pay for a hdd price increase)


    I don't think you get it. This has nothing to do with tablet/smartphone penetration into the PC market. The floods have caused HDD's to more than double in price and put a strain on the supply chain. Intel does not make huge amounts of profit off of pre-built systems, they make more money off of servers and corporations.

    I'll give an example. My company needed to purchase a storage device which we ordered w/28 1TB HDD's. Dell sold us the device but basically refused to sell us that many hard drives without "justification" then when the order was approved they couldn't give us a solid ETA they just said around 60 days. What this means is a lot of companies simply will not order until the supply chain is restored.

    So while your point about tablets and phones might be true you can be assured Intel is already aware of this as well and that was probably already accounted for in their projections. What they didn't account for was a natural disaster.
Other Comments
  • 6 Hide
    joey532 , December 12, 2011 11:14 PM
    Thats what they get for putting all their eggs in the same basket.
  • -1 Hide
    alidan , December 12, 2011 11:25 PM
    yea, i believe hdds are the reason, and not ipad and phones over taking a bit of the pc market in a big way, or that people dont need new computers if they have damn near any dual core, and better manufacturing makes parts last longer... i totally believe that anyone who needed a new computer (most sales are from pre built) didnt get one because it cost an extra 20-30$ (the bump that oems have to pay for a hdd price increase)
  • Display all 26 comments.
  • 10 Hide
    seezur , December 12, 2011 11:48 PM
    alidanyea, i believe hdds are the reason, and not ipad and phones over taking a bit of the pc market in a big way, or that people dont need new computers if they have damn near any dual core, and better manufacturing makes parts last longer... i totally believe that anyone who needed a new computer (most sales are from pre built) didnt get one because it cost an extra 20-30$ (the bump that oems have to pay for a hdd price increase)


    I don't think you get it. This has nothing to do with tablet/smartphone penetration into the PC market. The floods have caused HDD's to more than double in price and put a strain on the supply chain. Intel does not make huge amounts of profit off of pre-built systems, they make more money off of servers and corporations.

    I'll give an example. My company needed to purchase a storage device which we ordered w/28 1TB HDD's. Dell sold us the device but basically refused to sell us that many hard drives without "justification" then when the order was approved they couldn't give us a solid ETA they just said around 60 days. What this means is a lot of companies simply will not order until the supply chain is restored.

    So while your point about tablets and phones might be true you can be assured Intel is already aware of this as well and that was probably already accounted for in their projections. What they didn't account for was a natural disaster.
  • -5 Hide
    cheepstuff , December 12, 2011 11:53 PM
    joey532Thats what they get for putting all their eggs in the same basket.


    What on earth are you talking about? Intel, AMD, Nvidia, Texas Instruments don't buy HDDs for their own purposes, they sell a complementary product in a common industry.

    They aren't putting all their eggs in one basket any more than you put all your eggs in one basket when you assume your car will start tomorrow. If anything, Intel is competing them because they make SSDs.
  • 0 Hide
    jeraldjunkmail , December 13, 2011 12:05 AM
    What I'd really REALLY like to know is are the replacement parts for the HDD manufacturers that will be sourced from countries like Ireland and the USA be of higher quality, improving the quality of HDD's manufactured in the latter half of 2012?
  • 2 Hide
    CaedenV , December 13, 2011 12:10 AM
    well it isnt my fault, I am enjoying my i7 :) 
  • 3 Hide
    CaedenV , December 13, 2011 12:12 AM
    cheepstuffWhat on earth are you talking about? Intel, AMD, Nvidia, Texas Instruments don't buy HDDs for their own purposes, they sell a complementary product in a common industry. They aren't putting all their eggs in one basket any more than you put all your eggs in one basket when you assume your car will start tomorrow. If anything, Intel is competing them because they make SSDs.

    I believe he is referring to the HDD manufacturers all being located in one area. Every other major manufacturer from CPUs to cars has factories in multiple areas or countries.
  • 2 Hide
    de5_Roy , December 13, 2011 12:12 AM
    intel, amd, nvidia should talk with the retailer so that they don't inflate hdd prices.....
    amd's 4% loss will impact them more than intel's 4.7% loss will impact intel.
  • 1 Hide
    cheepstuff , December 13, 2011 1:18 AM
    de5_royintel, amd, nvidia should talk with the retailer so that they don't inflate hdd prices.....amd's 4% loss will impact them more than intel's 4.7% loss will impact intel.


    Everyone in the industry is doomed to lose money over this, it is a production volume issue. If not as many HDD can be sold, then it follows that not as many CPUs or graphics cards will be either. That cannot be solved by negotiating with the manufacturers or retailers to lower the price.
  • 0 Hide
    Anonymous , December 13, 2011 1:23 AM
    Seezur: Hard drives only doubled in price at retail. They did not double in price for OEMs that buy in uber-quantity.

    Your logic reminds me of the article Tom's did years ago suggesting that the price of copper going up was going to drive up the cost of motherboards, even though you're only looking at a couple of ounces, max, which could drive up the cost of manufacturing by a whopping $10 under extreme circumstances.

    If anything, the fact that Best Buy will sell you a Core i3 laptop for $500, or a virtually identical Core i5 laptop that is only 10% faster for $900 shows that there's plenty of wiggle room in OEM PC pricing. Only the sub-$500 price range might necessarily see a small bump in price.
  • 0 Hide
    billj214 , December 13, 2011 1:23 AM
    Cudo's for Intel taking the initiative to let the investors know ahead of time, too bad it affected other companies but that's more of the fact that Intel is tied to tech stock bundles!

    I think this may give the SSD drives a quick boost in sales, although 28tb of storage in SSD's is a large chunk of change!
  • 0 Hide
    alidan , December 13, 2011 1:47 AM
    seezurI don't think you get it. This has nothing to do with tablet/smartphone penetration into the PC market. The floods have caused HDD's to more than double in price and put a strain on the supply chain. Intel does not make huge amounts of profit off of pre-built systems, they make more money off of servers and corporations.I'll give an example. My company needed to purchase a storage device which we ordered w/28 1TB HDD's. Dell sold us the device but basically refused to sell us that many hard drives without "justification" then when the order was approved they couldn't give us a solid ETA they just said around 60 days. What this means is a lot of companies simply will not order until the supply chain is restored. So while your point about tablets and phones might be true you can be assured Intel is already aware of this as well and that was probably already accounted for in their projections. What they didn't account for was a natural disaster.


    i forgot about the server market, at the same time i forgot that dell buys for the reduced price but can also inflate on their own... at the same time i am still doubting this is only due to hdd, and that tablets and phones arent a factor along with pc longevity.
  • 0 Hide
    seezur , December 13, 2011 3:15 AM
    knowledge_guruSeezur: Hard drives only doubled in price at retail. They did not double in price for OEMs that buy in uber-quantity.Your logic reminds me of the article Tom's did years ago suggesting that the price of copper going up was going to drive up the cost of motherboards, even though you're only looking at a couple of ounces, max, which could drive up the cost of manufacturing by a whopping $10 under extreme circumstances.If anything, the fact that Best Buy will sell you a Core i3 laptop for $500, or a virtually identical Core i5 laptop that is only 10% faster for $900 shows that there's plenty of wiggle room in OEM PC pricing. Only the sub-$500 price range might necessarily see a small bump in price.


    You are right except my point was more about supply chain than it was about price. Where I work we don't really care about price, we care about availability and I can assure you that the floods have impacted the supply chain to a level I have not seen before. Companies like Dell, HP and Acer do get a big discount on parts, that is a fact, but right now they are working with the supply they currently have with no projected resupply date. THIS is the problem because that means if they run out before manufactures can start production on new drives then they are simply out and then CANNOT sell new stuff.

    Also your point about retail pricing on new systems isn't exactly correct. I worked in retail for 8 years and a lot of the budget PC's that are sold are sold at or below cost in the hopes of selling accessories and warranties which have a much, much higher profit margin. Keep in mind that everything sold at a retail location cost that store money, much more money than you might think. Most stores only have a 20-30 percent markup on computers so your $900 laptop probably cost the store around $700 maybe more and the $500 laptop cost the store a little less than $440.

    The biggest misconception in this industry is that companies like Best Buy are making a killing off selling $300-$400 computers. It just is not true, in fact it is probably their least profitable item. Services, warranties, accessories and large ticket items are where these stores make the money.
  • 0 Hide
    alidan , December 13, 2011 4:54 AM
    seezurYou are right except my point was more about supply chain than it was about price. Where I work we don't really care about price, we care about availability and I can assure you that the floods have impacted the supply chain to a level I have not seen before. Companies like Dell, HP and Acer do get a big discount on parts, that is a fact, but right now they are working with the supply they currently have with no projected resupply date. THIS is the problem because that means if they run out before manufactures can start production on new drives then they are simply out and then CANNOT sell new stuff.Also your point about retail pricing on new systems isn't exactly correct. I worked in retail for 8 years and a lot of the budget PC's that are sold are sold at or below cost in the hopes of selling accessories and warranties which have a much, much higher profit margin. Keep in mind that everything sold at a retail location cost that store money, much more money than you might think. Most stores only have a 20-30 percent markup on computers so your $900 laptop probably cost the store around $700 maybe more and the $500 laptop cost the store a little less than $440. The biggest misconception in this industry is that companies like Best Buy are making a killing off selling $300-$400 computers. It just is not true, in fact it is probably their least profitable item. Services, warranties, accessories and large ticket items are where these stores make the money.


    you bring up best buy, who screw the consumers more than any other company i have dealt with in the past few years, and i can say cry me a river to them if they lose money.

    i had a warranty with them for my xbox, we misplaced the warranty slip, took it in and they told us it was up... a few months later we found the slip, and found out that the xbox, at the time, was still under warrenty

    a bit later than that, i required new parts for my computer, and had no other choice if i wanted it that day, so i spent 20$ on a sata cable that should have costed 2-5$

    and about a 7 or so months ago, i preorded the squire stratoaster for rock band through them, as they have it exclusively or at least than, and there were no guarantees that if you don't preorder you would get it. so i got it through them, and was lucky enough to not get it on back order. but many people did, and it was at random... we found out that they had stocked their stores before they honored their preorders.

    i know this is a bit of an off topic rant, but trying to have any kind of sympathy for best buy makes me feel a bit sick.

    that said, the people who buy the extreme budget pcs get those warrentys where they dont have to do anything, and try to get out of honoring it at every turn. i really feel sorry for the people who buy those things.
  • 0 Hide
    GoldenI , December 13, 2011 5:07 AM
    These prices are ridiculous. What's hilarious is that Seagate is not even within the affected areas, and they are simply using it as a marketing ploy.. Not to mention Christmas is right around the corner. It's an inconvenience to us, but somewhat smart in the world of marketing and sales.

    I expect a negligible price drop of about 15% on all HDDs after Christmas and into the new year.

    I really, REALLY need a larger hard drive as this 500GB HDD is down to 100GB left. So many games/music I want to download! -_-;
  • 0 Hide
    digiex , December 13, 2011 7:40 AM
    The problem will be repeated if the Hard Drive manufacturers don't relocate in a suitable country. Until then, the most expensive part of the computer will be the Hard Drive.
  • 0 Hide
    belardo , December 13, 2011 8:09 AM
    jeraldjunkmailWhat I'd really REALLY like to know is are the replacement parts for the HDD manufacturers that will be sourced from countries like Ireland and the USA be of higher quality, improving the quality of HDD's manufactured in the latter half of 2012?


    I think he meant that almost all HDs are built in the same place. In a few Asian cities.
  • 0 Hide
    GoldenI , December 13, 2011 8:13 AM
    digiexThe problem will be repeated if the Hard Drive manufacturers don't relocate in a suitable country. Until then, the most expensive part of the computer will be the Hard Drive.

    If they were to relocate to a more "suitable" country, then that would result in the loss of even more money. They would end up paying workers in a more suitable country much more than the penny wages in Thailand. Cheap labour = more money for the HDD devs.
  • 0 Hide
    belardo , December 13, 2011 8:16 AM
    GoldenIThese prices are ridiculous. What's hilarious is that Seagate is not even within the affected areas, ~~ I really, REALLY need a larger hard drive as this 500GB HDD is down to 100GB left. So many games/music I want to download! -_-;

    A) No, not really. Its supply and demand - Seagate cannot make enough drives to meet market demands, the value goes up, period (notice how oil prices effect us?). Unlike the 80s~90s when we had 20 brands with drives made all over the world, now it hurts. But in return, we usually get 2TB drives for under $100. WD is totally screwed as their factories are under 2 feet of water... really ruins the clean room. Issue is... what about the next flood? With climate change and industrialization of areas without proper water management - it'll happen again.

    B) Know what you mean about drive prices... I really need a 2TB drive - but may have to wait till the prices drop.

    C) Prices seems to have stabilized a bit. 2 weeks after the flood, 2TB drives were hitting $200~300. The 5600RPM drives are starting at $145 (Seagate) WDs are the most expensive.
  • 0 Hide
    GoldenI , December 13, 2011 8:22 AM
    belardoA) No, not really. Its supply and demand - Seagate cannot make enough drives to meet market demands, the value goes up, period (notice how oil prices effect us?). Unlike the 80s~90s when we had 20 brands with drives made all over the world, now it hurts. But in return, we usually get 2TB drives for under $100. WD is totally screwed as their factories are under 2 feet of water... really ruins the clean room. Issue is... what about the next flood? With climate change and industrialization of areas without proper water management - it'll happen again.B) Know what you mean about drive prices... I really need a 2TB drive - but may have to wait till the prices drop.C) Prices seems to have stabilized a bit. 2 weeks after the flood, 2TB drives were hitting $200~300. The 5600RPM drives are starting at $145 (Seagate) WDs are the most expensive.

    A) With regards to your point on "oil pricing"... there was an incident not long ago where oil prices were jacked up, yet no conflict was occurring in the oil drilling regions. I find it very hard to believe that there isn't enough oil to meet our demands. ME and my father both agree that the US has enough oil locked away in caverns and abandoned mine shaft to supply the US for 200 years. I'd like to know where, exactly, Seagate is located and then I can further theorize from there.

    B) I don't really want to wait, but what choice do I have? At that point, drive prices will probably be lower and I'll be able to get a 4TB for the current price of a 2TB. Who knows?

    C) Still waiting for the 2TB for under $100 :p 
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