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Global HDD Supply 70 Million Units Short in Q4 2011

Following a similar price hike initiated by Acer, PC manufacturers Asus and Dell are expected to increase the prices of notebooks slated to arrive in December by 2 to 3-percent thanks to the current shortage of hard drives. In 4Q11 alone, the global supply is expected to be 35-percent short of the overall demand for 180 million units, leaving only around 110 to 130 million units available worldwide.

Retail channels in Taiwan have already seen a 20 to 30-percent HDD price hike since the flooding shortages began back in October, and will reportedly see another 10-percent price increase in December. Vendors like HP, Acer, Asus and Dell will get first priority, leaving the secondary retail buyers fighting for what's left -- some of which are already hoarding hard drives in fear of a depleted global supply.

According to unnamed sources in Taiwan, several PC manufactures are actually optimistic about the hard drive supply in 1Q12, believing that the shortage will finally ease before the spring. Other manufacturers aren’t quite so positive, predicting that supply will begin to pick up in the second quarter of 2012. Either way, PC vendors will likely see increased hard drive costs throughout 2012, as the supply chain won't return to pre-Thailand flooding levels for another nine to twenty-four months.

Earlier this month Nidec, the Japan-based hard drive motor supplier which contributes to around 75-percent of the global HDD shipments, said that its Ayutthaya plants in Thailand had already resumed production. The company also announced that it was increasing production capacities in Philippine and China to help cover the impact from the floods. Nidec said it believed its efforts should help narrow down the HDD supply gap in 4Q11 despite the gloomy outlook.

But some companies and analysts are preparing for the worst. "We could run out of drives by the end of November," Piper Jaffray analyst Gus Richard said in an interview several weeks ago. "Availability is really going to tighten up. I'm seeing prices quoted anywhere from up 10 to up 60-percent. Nobody seems to be really paying attention. Everyone overreacted to the disaster in Japan. And now I think they're under-reacting."

Could the current hard drive shortage pave the way for solid state disks to take over as the primary storage medium? Unfortunately they cost more per gigabyte than mechanical drives despite offering better performance and reliability. But SSD retail prices are falling, and are expected to continue to drop once 3-bit flash arrives in 2012 and as the industry shifts over to 29 to 20-nm process technologies. Until then, mechanical hard drives will likely remain the primary storage device for some time to come.