HDD Makers Want Long-Term Contracts With PC Vendors

Due to the tight supply of hard drives stemming from the Thailand flooding back in October and November, hard drive manufacturers have reportedly asked PC vendors to sign a one-year contract at specified prices and volumes to ensure their required number of units.

While hard drive manufacturers and component makers have largely resumed operations within the last month, they're not at optimum level, and the pace of recovery varies from factory to factory, making it hard to determine if the worst-case supply scenario is over. As it stands now, hard drive makers expect the global unit output to decline 30-percent sequentially in 4Q11 and extend on into 1Q12, producing only 140 million units between January and the end of March.

Yet many PC vendors are reluctant to sign a one-year contract. According to industry insiders, the vendors fear that hard drive prices may drop sharply once the supply chain fully recovers from the impact of the floods, and the contract will be locking them in at the higher, inflated price. Currently many PC vendors are purchasing hard drives on a quarterly basis.

Meanwhile, Stellar Data Recovery reports that PC vendors will likely turn to the "grey market" to acquire the hard drives not supplied in the normal channels. The grey market is defined as "the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer."

"The lack of good quality HDDs means computer manufacturers will seek out other markets and procurement channels in order to meet demand," the company reports. "The grey market is likely to appear in the guise of an attractive and easy alternative. Stellar Data Recovery is keeping a vigilant eye on this alarming development, for the simple reason that HDDs from grey sources are more likely to fail, as they are unlikely to have undergone all the necessary quality checks. Normally, Stellar Data Recovery is able to recover lost data, even from ‘grey’ HDDs. Nonetheless, the increase in data loss and downtime due to the reduced quality of HDDs will have unwanted knock-on effects for many businesses in the future. "

Using HDDs supplied by the grey market means the quality of many products, PCs, laptops and cheaper servers could be compromised, the company said.