Hard Drive Prices To Remain High Until 2014: Report

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The quick recovery in hard drive production since last year's disastrous Thailand floods will not result in a return to pre-flood pricing until next year, according to a new report.

IHS iSuppli, an El Segundo, Calif.-based analyst, on Wednesday reported that hard drive average selling prices reached a low of $51 in the third quarter of 2011, but rocketed to $66 in the fourth quarter of 2011 and the first quarter of 2012 before falling marginally to reach $65 in the second quarter.

The spike in prices late last year stemmed from severe floods in Thailand which wiped out nearly a third of the world's hard drive manufacturing capacity.

[Related: Hard-Drive Shortage Hits Enterprise Drive Shipments Hard]

IHS iSuppli estimated that the Thailand floods caused fourth-quarter 2011 hard drive shipments to plummet by about 29 percent over the previous quarter. However, shipments rose 18 percent in the first quarter of 2012 and 10 percent in the second quarter.

During the third quarter, IHS iSuppli expects shipments to rise another 10 percent to reach 176 million drives, the first time total shipments will exceed last year's third-quarter shipments of 173 million drives since the floods.

Enterprise drive supplies and pricing were hit especially hard because of the flood thanks to a strong overall storage market combined with a relatively weak PC market.

Fang Zhang, analyst for storage systems at IHS iSuppli who authored the analyst firm's latest report, wrote that average selling prices will remain above pre-flood levels until 2014 in part because of recent huge mergers that have left the hard drive industry with only two key players, Cupertino, Calif.-based Seagate and Irvine, Calif.-based Western Digital, controlling about 85 percent of the market between them.

It is a sentiment shared by Todd Swank, vice president of marketing at Nor-Tech, a Burnsville, Minn.-based custom system builder.

Seagate's acquisition of Samsung's hard drive business and Western Digital's acquisition of Hitachi GST have created a market duopoly, Swank said. "Seagate and Western Digital would be crazy to get in a price war," he said.

NEXT: Lack Of Alternatives Plus Long-term Contracts Keeping Prices High

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