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Chia Coin Won’t Drive Up Most HDD Prices, Analysts Claim

Toshiba
(Image credit: Toshiba)

Financial analysts believe that while hard disk drive pricing has spiked in recent weeks due to Chia coin mining and will continue to be higher than usual for a while, average HDD prices will not get considerably higher than they are today as there is extraordinary demand for specific models rather than for all kinds of drives. But there's a catch. 

Demand for nearline hard drives for data centers has consistently grown for years. In contrast, demand for high-capacity HDDs for consumers has increased in recent weeks because of Chia coin cryptocurrency mining. As a result, prices of higher-capacity hard drives increased in recent weeks, whereas range-topping models have sold out.  

The market is experiencing a tight supply of HDDs, which is comparable to the situation in 2012 when flooding in Thailand stopped the production of hard drives in the country. Back then, average prices of HDDs increased by roughly 22%, according to Sidney Ho, an analyst with Deutsche Bank. This time, price hikes will not be that high. 

"While the use of storage for Chia is relatively small compared to the total industry output, demand for large consumer hard drives has increased significantly due to Chia mania, with drives sold out on many websites and pricing on secondary markets meaningfully higher than usual," Ho wrote in a note to clients, reports Barron's

Our HDD price analysis from earlier this week demonstrated that prices of midrange HDDs featuring a 6TB or 8TB capacity did not change significantly in recent weeks. 10TB hard drives also did not get substantially more expensive. Meanwhile, 12TB, 14TB, 16TB, and 18TB HDDs got dramatically more expensive in just a few weeks (some SKUs gained $100, others doubled).

The vast majority of 14TB – 18TB HDDs are nearline drives, such as Seagate's Exos and Western Digital's WD Gold and Ultrastar. Most of those drives are sold directly to companies like Amazon Web Services, Google, and Microsoft at pre-arranged prices and therefore never reach retail.   

Joseph Moore, an analyst with Morgan Stanley, says that Seagate sells about 30% of its HDDs via distributors and retailers, whereas Western Digital ships 40% of its products using these channels. As a result, the vast majority of hard drives from Seagate and Western Digital are not sold through retail and therefore cannot get meaningfully more expensive because of the ongoing Chia mania. Still, the manufacturers can naturally increase their prices because of higher demand and the necessity to procure more components. 

In general, while high-capacity HDD retail pricing could increase by well over 22%, average HDD prices will not increase tangibly as most HDDs are sold at pre-arranged prices. In contrast, midrange models are not getting more expensive due to modest demand. 

"Our view right now is that Seagate and Western Digital will benefit from the incremental volume, pricing and thus gross margin tailwinds in the short-term, but that cloud demand […] remains the primary driver of results," Ho wrote. "Longer-term, there just remains too much uncertainty […] on the future general acceptance of Chia or most cryptocurrencies to fundamentally adjust our outlooks for the industry. Whatever Chia becomes, though, it is a positive for the industry to see additional potential consumer growth opportunities."

  • bigdragon
    That's not how this works. As the models in demand sell out and fail to get restocked, demand spreads to other models. The dominoes all fall in sequence. Same thing has played out in the GPU ecosystem. We've seen this in the past with shortages in RAM too, and also in industries such as building materials and food. The analysis is completely wrong. Prices will bump up for everything and stay there until companies increase output (which they probably won't).
    Reply
  • velocityg4
    I think what he's talking about is prices for OEMs won't increase much. Which they probably won't, for now, as they have contracted rates and different distribution channels. Also these large drives are mostly going in business servers destined for datacenters. The bulk of the large drive market. You can just imagine how many Google or Amazon buys.

    Even then every extra drive will go to the retail distributors and current business customers may not have much luck increasing their orders without a new contract. As it's no longer WD competing with Seagate for customers but the business customers competing with miners for anything they can get their hands on.

    Pools are coming at the end of this month. Now people can start tossing on a bunch of 1TB to 5TB drives. They won't make the money the whales make with 2 PB arrays. But it'll be enough to make an extra $10 to $20 a day. Just like a lot of GPU miners who use just a few GPU.

    Even with the big miners. If they can't get 10 to 16TB drives at a reasonable price. They can use more 4TB to 6TB drives. It just takes a bit more organization and time to manage more drives. But once it's going they can just sit back and relax. It's not like the additional power cost matters as the usage is negligible.

    Just look at 8TB drives. They're already getting scarce.

    While I haven't looked into secondary peripherals. This must be or at least will be affecting prices and availability of those too. Items like power strips, long USB cables, USB hubs, cheap SATA raid cards, 5.25 to 3.5 bay adapters and multi-drive enclosures. I'll bet computer case manufacturers are shocked at the sudden resurgence of old ugly full tower cases that house 10+ 3.5 hard drives.

    As Chia is proving a hit. This is just the beginning. There'll be a ton of copycat crypto's.
    Reply
  • PhilFrisbie
    I guess the cost of the 4tb drives I use in home NAS servers that went from $60 each two weeks ago to $80 today is just my imagination. . .
    Reply
  • InvalidError
    bigdragon said:
    That's not how this works. As the models in demand sell out and fail to get restocked, demand spreads to other models. The dominoes all fall in sequence. Same thing has played out in the GPU ecosystem. We've seen this in the past with shortages in RAM too, and also in industries such as building materials and food. The analysis is completely wrong. Prices will bump up for everything and stay there until companies increase output (which they probably won't).
    The bulk of HDDs are sold direct to large corporations, which means Chia miners don't even have the option to interfere with supply there no matter how much money they may want to throw at it. This is quite different from GPUs where higher-end consumer GPUs would normally go practically exclusively to gamers.

    I wouldn't worry at all about Chia miners snatching 1-6TB HDDs any time soon if ever, though there could be a price increase in the longer-term as HDD manufacturers re-allocate materials and manufacturing capacity from smaller low-margins drives to higher capacity higher-margins drives.

    I wonder how long it will be until people realize that Chia mining isn't really any more environmentally friendly than BTC or ETC. It may not require the same amount of always-on brute-force number-crunching but it does require a never-ending amount of storage, replacement SSDs for plotting and enough number-crunching to fill that storage as fast as it can be deployed.
    Reply