The 2011 floods in Thailand will hamper the hard drive manufacturing industry through 2014, according to analysts.
A report from research firm IHS suggests that the ongoing recovery from the disaster means that the price of hard disk drives (HDDs) will not return to pre-flood levels for at least two more years.
A series of floods in Thailand in late 2011 devastated the region which is responsible for manufacturing the bulk of the world's hard disk drives. In the wake of the disaster, PC shipments were put on hold and both PC vendors and chipmakers saw their financial results slip due to the slowdown.
The company said that in the wake of the flood, production levels fell by some 29 per cent over the fourth quarter of the year. Additionally, the average cost of a drive rose from $51 to $66. While manufacturing levels have since recovered, strong demand remains for HDDs.
As a result of the increased demand, IHS found that PC vendors have become more interested in singing long-term contracts with hard drive vendors to guarantee against future shortages. While the deals provide peace of mind for system vendors, they also provide lock-in at a price premium.
Additionally, analysts believe that the recent consolidation in the market will allow HDD vendors to keep prices up over the short term.
"With the two mega-mergers between Seagate/Samsung and Western Digital/Hitachi GST, the two top suppliers held 85 per cent of HDD market share in the first quarter 2012. This was up from 62 per cent in the third quarter of 2011, before the mergers," explained IHS storage systems analyst Fang Zhang.
"The concentration of market share has resulted in an oligarchy where the top players can control pricing and are able to keep average selling prices at a relatively high level."
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