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Disk drive duopoly reducing supply to inflate prices
invite response
2013 Feb 4, 7:30am 6,718 views 16 comments
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zzyzzx
2013 Feb 4, 8:12am
Really not sure how relevant this article really is since the industry is moving to SSD's which have tons of makers now.
curious2
2013 Feb 4, 8:16am
Really not sure how relevant this article really is since the industry is moving to SSD's
SSDs cost 10x more per GB than spinning disks, so the IT industry and much of the economy depend on spinning disks. 20% price inflation is a dramatic change compared to the era of competition.
CL
2013 Feb 5, 4:05am
Really not sure how relevant this article really is since the industry is moving to SSD's
SSDs cost 10x more per GB than spinning disks, so the IT industry and much of the economy depend on spinning disks. 20% price inflation is a dramatic change compared to the era of competition.
It will take quite a while before servers are on SSDs. The large ones are extremely expensive. And you'll still do types of RAID.
Even for personal devices, your price point drops above 128GB.
Question is...is it collusion? If you cut output and there are still margins, why wouldn't the order drive manufacturers step in?
curious2
2013 Mar 9, 4:45am
Question is...is it collusion? If you cut output and there are still margins, why wouldn't the order drive manufacturers step in?
Both duopoly CEOs mirror each other in press releases, so effectively they are colluding in plain sight. I haven't read the merger agreements with the older drive manufacturers, but I would expect they contain non-compete provisions and likewise employees have probably been required to sign non-competes as well. As in, 'We're buying your company, we'll pay you $$$, but you agree not to go start your own company competing with us for x years.' The issue is, since each duopoly player has less than 50% of the market, if there is no secret collusion agreeing expressly to restrict production, is it illegal?
curious2
2013 Mar 9, 8:04am
has a capacity plateau been reached?
Theoretical capacity continues to increase rapidly, but it isn't getting through the duopoly to the customer.
We see announcements of increased capacity technology all the time, everywhere except on store shelves.
New Renter
2013 Mar 9, 8:30am
has a capacity plateau been reached?
We see announcements of increased capacity technology all the time, everywhere except on store shelves.
Or perhaps there are other problems with the new technologies that require more work before being released. We wouldn't want another death star now would be?
curious2
2013 Mar 9, 8:51am
perhaps there are other problems
Do you have any evidence of that? There is clear evidence of the duopolists throttling production to keep prices elevated, and cutting "cost structure" (e.g. new product development) because the CEOs actually brag about it in conference calls to investors. Do you have any evidence to support an alternate explanation for why prices have increased 20% during a period when historically $/GB would have fallen by half?
New Renter
2013 Mar 9, 9:17am
perhaps there are other problems
Do you have any evidence of that?
No, nor did I claim to. I did admit I was NOT savvy to current HD tech remember?
Not savvy on HD tech - has a capacity plateau been reached?
I only mentioned it as a potential reason why those new technologies may not yet have been implemented. Throttling production would be a natural reaction to a density plateau as consumers will have less reason to upgrade their current drives.
CL
2013 Mar 11, 10:02am
Do you have any evidence to support an alternate explanation for why prices have increased 20% during a period when historically $/GB would have fallen by half?
It's following the housing model? :)
Next thing it will be used small hard drives for more than they original owner paid!
Are magnetic disks dropping?
curious2
2014 Aug 26, 11:02am
The duopoly are now using their market power in one segment to take over another: "hard disk manufacturers and their subsidiaries have cornered nearly two-thirds of the market, squeezing out mainstream non-HDD vendors."
At the same time, quality has fallen and warranties have got shorter, as the duopoly have stopped publishing essential specifications (e.g. the number of platters and heads) in order to pit OEMs against each other and get the lowest wholesale cost, while retailing it at the highest prices.
curious2
2014 Aug 26, 11:36am
Again, was anybody preventing you from buying stock in WD or STX?
No, but that isn't really a solution. You can say, "STX and WD are up by as much as the prices of HDDs, so it's a wash," but the dramatic gains in STX and WD are offset by reduced gains (or losses) in the stocks of their suppliers and customers, and besides the other consequences remain - reduced R&D, slowed progress, shorter warranties, more drive failures including data loss, etc. It is possible to be happy about higher stock prices but also unhappy about higher retail prices for worse products, depending on what is on your mind at any given moment.
MAGA
2014 Aug 26, 12:08pm
I miss my Heathkit H89, running CP/M on 8" floppies. Internet? Hell no. I dialed into my local BBS. No Realtor's around to slow down my 300 baud modem.
Having bought out most of their competitors, Seagate and Western Digital have controlled 90% of the hard disk market since 2012Q1. Thailand flooding provided an excuse to raise prices, but now executives are boasting about the real reason why prices remain elevated: "We’re sliding our capacity output to match demand."
They are also boasting about "opportunities...to improve our cost structure," presumably by cutting R&D. Individual drive capacity had been doubling every two years, and $/GB had been falling every year for more than half a century, but not anymore. Despite record supply capacity and falling demand, average drive prices remain 20% higher than before the industry was allowed to consolidate into a duopoly.
This story illustrates the importance of competition, including antitrust enforcement. Instead large sectors of the economy are consolidating into giants that can exert both pricing power and political power to co-opt regulators. The same is happening in other sectors, including financial (TARP) and especially medical (Obamacare). It's comic how the advertising-dependent press tout consolidation as good news because it means higher margins for their advertisers, but it's tragic when consumers fall for the pitch. The results are always higher prices for consumers, lower wages ("costs") for the people who make things work (e.g. R&D), and higher payouts for the CEOs and pols who make the deals happen.
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