Wednesday, December 28th 2011
HDD Vendors Want Long-Term Contracts with PC Makers
Well, it seems that the flooding in Thailand has done a lot more than destroy lives, wreck a few factories and cause HDD prices to shoot up. There appears to be a lot of opportunities for changing the terms of business too - to less favourable ones for customers of hard disc drives. First, we had the severe and unwelcome warranty reductions and now we have HDD manufacturers trying to lock branded PC makers into expensive long-term contracts, according to Digitimes. Some PC makers buy hard disk drives on a quarterly basis, at a fixed price, but now that prices have shot up and supplies restricted, HDD manufacturers are trying to coerce them into signing one year contracts at current high prices. However, it looks like it might not be such a good deal for PC makers, because the recovery in supply is continuing, with a full recovery potentially not so far away, which will of course make those prices plummet again. As it is, HDD shipments are projected to be around 140 million units in the first quarter of 2012, while the same quarter last year was 170-180 million units - so the fall isn't really that hugely less than before anyway and should become less severe as 2012 wears on.
One does get the impression that the HDD manufacturers are playing up the difficulty of restoring production volumes in order to give them a better bargaining hand. There's also the fact that recovering from the disaster is hugely expensive for them, so HDD makers will want to charge more to recoup those costs faster, motivating them to use tactics like these.
One does get the impression that the HDD manufacturers are playing up the difficulty of restoring production volumes in order to give them a better bargaining hand. There's also the fact that recovering from the disaster is hugely expensive for them, so HDD makers will want to charge more to recoup those costs faster, motivating them to use tactics like these.
22 Comments on HDD Vendors Want Long-Term Contracts with PC Makers
we all know the floods hit them pretty bad, but attempting to coerce the market into signing a years contract at stupidly high prices when their production is ALMOST back at full capacity is just beyond despicable.
their like some footballer that tripped over their own two big feet and deliberately cry foul to try get one of the opposing team penalised then holding his leg and crying some more until the medics with the stretcher comes out and carry him off the field when the ref refuses to punish the opposing player.
I think if any business can find a reason to have price hike on something, they will take advantage of it.
You can think of it this way. After the industry will fully recover and prices will once again stabilise at a low level, renewing a yearly contract could also protect the PC Makers in the event of another shortage that could arise just after they sign the contract renewal.
The only problem is that prices will always continue to fall as production scales up and the technology matures, so what the PC Makers will end up losing is the small margin that they would normally gain from this continued price fall.
But it's not all dark. This will just make PC Makers buy new-ish tech (the new HDD models, instead of the old ones) and the consumer will come out on top, even if there are a few pennys extra involved.
But seriously, the fact that this is true only makes it more unfortunate, doesn't it? :ohwell:
HDD manufacturers are not all of a sudden driven to make profits, they've always tried to make profits. The article's insistence that they're suddenly trying to be nasty about things is rubbish.
There's changes happening and manufacturers are trying to make the best of the current situation that they can. That means they're negotiating with manufacturers to get the highest price they can for their product for the most profit they can. There's nothing sinister about that.
Nobody is being forced into buying, they're trying to make the maximum profit they can, that's all.
That's right. They caused the floods themselves to force prices up (WTF?), and the referee (who is this?) isn't calling it a foul and the medics (who are they>) are carrying them off the field. Your explanation falls down on one technicality - it doesn't explain.
Read the OP - OEMs are being 'Coerced' Into signing on the dotted line. Coerced does not mean that the manufacturers went around to the OEMs HQ with a box of cadburys milktray, flowers & a bottle of wine to talk the director into agreeing to do business.
they are trying to make maximum profit by trying to force OEMs to sign up.
Its true - they didnt cause the floods, but the point I was trying to make is they are playing on their injuries to try and manipulate the game. something thats happening as clear as day.
Taken from the OP as its clear you didnt read it or at least attempt to understand what was being posted:
Production is ALMOST - and i said ALMOST back up to full capacity - this should be really really easy for them to recover from and they know it and they cant use the flood as an excuse much longer so they try to force OEMS to sign a year long contract so that even if they do get back to 100% production. the OEMs are still stuck paying the prices they agreed on at the start of the year and who wants to be stuck paying extortionate prices for hard drives for a whole year when production when production is almost back to full capacity??? No one does.
My post explains alot, its just that you fail to understand it just like you fail to understand whats going on with the market.
bottom line is - if the OEMs do sign up, we the consumers will be stuck paying well over £100 for a 1Tb hard drive that used to cost under £40 before the floods for another year & possibly more and that will also reflect on the OEMs like Dell, Alienware, CompaQ & HP who build pre-built units as they will have to keep their costs up as there are no savings to be passed on to the consumer.
What may happen is that the manufacturer will hire more people to work for the already existing wage.
That's the whole deal about outsourcing to Asia, not having to pay all that much for labor.
That said I have no problem paying a premium price for a premium product, ie if a hard drive and all the parts for it and its assembly was done in Japan by high paid skilled workers with a high level of quality control and a good 5 yr warranty I would have no problem shelling out $200 for a 1 TB drive any day of the year.
I'm surprised that you're so naive in this respect, e. If they make fatter profits, the only people to benefit are the CEO's and shareholders, as others have said. The poorly paid staff that do all the donkey work in the factories will be told to put up and shut up and that they're lucky to have a job at all.
No, forcing these PC makers to sign such a contract is bad for them and their customers ie, us. Think about it: you wouldn't have to use coercion when you have a good offer that everyone wants, do you?
And I can tell you definitively, that I'm not an authority on economics :p so it sounds like we could complement each other here. ;)