HDD Vendors Want Long-Term Contracts with PC Makers

[qubit]

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.

[FreedomEclipse]

I say we need to get some sort of watchdog to threaten them with some manipulation or price fixing (im not sure if Antitrust fits in here...probably not as all the HDD manufacturers are in on it) lawsuits, maybe then they will stop trying to play up the disasterious effects that the floods have had on their production.

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.

[Rule-R]

They should give Neelie Kroes her old job back, so she can kick some more company but's.

[Widjaja]

I had a feeling that the HDD manufacturers were going to exploit the flooding and make the disaster in to a profit making scheme.

I think if any business can find a reason to have price hike on something, they will take advantage of it.

[dimensi]

as for me ... a system builder ... I just wish they made their product more reliable ... this past 2 months i have to claim harddrive that have bad sector more than 10 units ...

[TheMailMan78]

Originally Posted by qubit

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.

A lot of manufacturing industries do this. One year contract is short. This is SOP for most industries honestly. In the apparel industry they lock in 1 year prices for cotton all the time. Some 2 years depending on the guaranteed volume. And thats a natural resource susceptible to weather.

[Sihastru]

I don't see this as a bad thing or a good thing. It's just another thing.

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.

[qubit]

Originally Posted by TheMailMan78

A lot of manufacturing industries do this. One year contract is short. This is SOP for most industries honestly. In the apparel industry they lock in 1 year prices for cotton all the time. Some 2 years depending on the guaranteed volume. And thats a natural resource susceptible to weather.

What? They do this everywhere? I don't believe you!

But seriously, the fact that this is true only makes it more unfortunate, doesn't it?

[lashton]

Originally Posted by qubit

What? They do this everywhere? I don't believe you!

But seriously, the fact that this is true only makes it more unfortunate, doesn't it?

and another follod would mean that they cant jack prices up again also haha

[RejZoR]

Maybe they should start inventing new technology for a change instead of just jacking up a 50 years old tech... and move all 100 plants from one location to locations all over the world so stupid flooding scenario won't happen again. And stop playing stupid and trying to go the easy way. Maybe it's really a time for an SSD revolution. Maybe they'll start thinking a bit when that happens...

[Halk]

This news item is rather poorly written, it 'feels' like a Fuzilla article.

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.

[Halk]

Originally Posted by FreedomEclipse

I say we need to get some sort of watchdog to threaten them with some manipulation or price fixing (im not sure if Antitrust fits in here...probably not as all the HDD manufacturers are in on it) lawsuits, maybe then they will stop trying to play up the disasterious effects that the floods have had on their production.

None exists. When you do find one, point them at OPEC first, ok?

Originally Posted by FreedomEclipse

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.

Nobody is being forced into buying, they're trying to make the maximum profit they can, that's all.

Originally Posted by FreedomEclipse

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.

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.

[FreedomEclipse]

Originally Posted by Halk

None exists. When you do find one, point them at OPEC first, ok?

well there are loads of watchdog organisations out there already, but their main focus is things closer to home instead of global/international issues. Office Of Fair Trading anyone (And yes - I actually worked there at one point) then theres the E.U but they tend to go after bigger prey like Intel because they have more billions.

Originally Posted by Halk

Nobody is being forced into buying, they're trying to make the maximum profit they can, that's all.

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.

Originally Posted by Halk

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.

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:

Originally Posted by qubit

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

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.

[erocker]

Boo hoo, I can't have my cheap HDD storage anymore. Hopefully prices remain higher and the people actually making these devices are paid better.

[TheMailMan78]

Some of you guys have no concept of supply lines and budgeting. What these guys are doing is as normal as tying your shoes. Really this isnt a big deal. A fixed cost of overhead is what every major corporation aims for yearly. It allows them to budget their finances and investments. Without it you can kiss R&D good bye and any expansion as they would never know how much they could spend and horde every dime. That means no rasies and no new jobs.

[_JP_]

Originally Posted by erocker

Hopefully prices remain higher and the people actually making these devices are paid better.

You know that even if the prices do remain higher, it doesn't mean the guy in the production line will get more money for his/her work.
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.

[mechtech]

Originally Posted by erocker

Boo hoo, I can't have my cheap HDD storage anymore. Hopefully prices remain higher and the people actually making these devices are paid better.

One could only hope. I don't know what the Thailand employees get for remuneration, but I have a feeling they won't be getting a raise. And on top of that warranties got cut and we have no idea about longevity.

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.

[qubit]

Originally Posted by Halk

This news item is rather poorly written, it 'feels' like a Fuzilla article.

And that's because you're some sort of authority on this and could do it better, yes? Please confine comments like this to the comments section. Oh and it's spelled Fudzilla.

Originally Posted by erocker

Boo hoo, I can't have my cheap HDD storage anymore. Hopefully prices remain higher and the people actually making these devices are paid better.

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?

[Static~Charge]

Originally Posted by erocker

Boo hoo, I can't have my cheap HDD storage anymore. Hopefully prices remain higher and the people actually making these devices are paid better.

And if the manufacturers raise hard drive prices, I expect them to raise the warranty period, too. Instead, they'll just rake in more cash to stuff into some fat bastards' pockets (in other words, they get the gold, and the consumers get shafted).

[Halk]

Originally Posted by qubit

And that's because you're some sort of authority on this and could do it better, yes? Please confine comments like this to the comments section. Oh and it's spelled Fudzilla.

Thanks for the typing correction. I was trying to be constructive. As for an authority? It really depends on what you mean. Do you mean economics? Then yes I am an authority on economics, although I'm not going to explain why, so you can feel free to believe me or not. I'm no journalistic authority. I probably could do better than this article if I tried... however I believe that you can (and usually) do better than this article which is the reason I posted.

[Morgoth]

mybe they sould make a hd factory above sea level, lets say Mount Everest?

[qubit]

Originally Posted by Halk

Thanks for the typing correction. I was trying to be constructive. As for an authority? It really depends on what you mean. Do you mean economics? Then yes I am an authority on economics, although I'm not going to explain why, so you can feel free to believe me or not. I'm no journalistic authority. I probably could do better than this article if I tried... however I believe that you can (and usually) do better than this article which is the reason I posted.

Ok, I'm not sure I completely agree with you, but I do appreciate that you intended to make your comment constructive and that's why I've clicked Thanks. (I'm a sucker for this).

And I can tell you definitively, that I'm not an authority on economics so it sounds like we could complement each other here.

[erocker]

Originally Posted by qubit

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.

Duh, No $**t? I know exactly where the money woud go. But people still need their cheap crap and don't give a damn at who gets exploited to make their cheap crap. That's my point, it's far from being naive.