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WD: HDD prices won't fall to pre-flood levels until 2013

Biz, consumers still footing bill after Thai production went underwater

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Hard disk drive pricing may not tumble to pre-flooding levels until next year as consumers and businesses continue to foot the bill for reparation work, WD has claimed.

The once waterlogged WD fabs in the Navanakorn Industrial Estate Zone in Thailand were cleaned up earlier this year and are back up and running following the worst flooding in the country for half a century.

The crisis seriously dented the output of the market behemoth's production lines but also dampened some component manufacturing at Seagate, which caused market prices to rise rapidly in the weeks after the flooding.

WD's UK and Ireland senior sales director, Ian Keene, said the costs associated with resolving the matter mean pricing is unlikely to hit previous lows until late this year or early next.

"There are a lot of added costs right now," he said. "WD spent a lot of money on capital damage, running [under-utilised] factories that still paid people and mitigating risks of [future] floods," he added.

Thai frogmen were even dispatched by the Thai government last year in a bid to salvage WD manufacturing kit from its two fabs, which produced 60 per cent of its drives worldwide.

Keene said that at the height of flood, defences surrounding the industrial park were raised, the government cleared out tributaries and dug new canals to divert any water from the industrial estate and WD raised the defences around its specific fabs.

Shifting more production to Malaysia has also had an impact, the vendor added, "clustering manufacturing brings efficiencies ... but when it is spread that is a cost".

Keene said WD had "recovered" more quickly than industry commentators had forecast – the plants were nearing full capacity some months ago – and said only some high-spec products remained in tight supply.

Sources in the distribution sector said the trade price for a 1TB drive was still at $90 – compared to the $50 prior to the Thai crisis in October – and some suspected this was suppressing demand.

A recent report by IHS iSuppli showed that the duopoly of WD and Seagate hold a combined 85 per cent share of the worldwide market, which will serve to keep average sales prices (ASP) high until 2014.

According to channel analyst Context, which tracks distributor shipments, internal drive ASPs went up across the market by 117 per cent in November compared to September, before the impact of flooding was felt.

As it stood in June, pricing was on average 37 per cent higher than it was in September, though Seagate's ASPs were 46.6 per cent higher than pre-flood levels. ®

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