Hard disk drive price seen rising

Tighter supply of HDDs in the offing as companies still operating below capacity

GEORGE TOWN: The price of hard disk drives (HDD) is expected to rise further this year due to tighter supply in HDDs.

This is because time is needed for HDD and HDD component producers to re-invest to resume full production and increase capacity.

Eng Teknologi Holdings Bhd expects to produce a similar or slightly lower volume of hard disk drive (HDD) components in 2012 compared with last year due to the time required for full capacity production of HDD components to be restored.
Beh: ‘We will pump in more funds to acquire new machinery ... to increase production.’

Eng Teknologi chief executive officer Datuk YK Teh said the group's Thailand operations would only be able to kick off at the end of the first quarter.

“We will only be able to resume full capacity production in Thailand by year-end.

“The price of HDD components will be adjusted accordingly to the tight supply situation,” he said. Last year, the group produced less than 140 million pieces of base plates, separators and actuators, about 10% less than 2010.

“To meet the needs of our customers in the Asia-Pacific region, we have started shipping out of the Philippines and Johor Baru since early this month,” he said. The current wholesale price of an external one terabyte 2.5-inch HDD is now hovering at RM345, compared with RM258 before the impact of the floods in Thailand.

Eng Teknologi has injected about RM50mil to expand its HDD component manufacturing operations in the Philippines and Johor Baru since its production in Thailand was disrupted by the floods late last year.

“Because of the floods in Thailand, we have reduced our workforce over there by over 60%.We are also expecting to write off in our 2011 financial year approximately RM57mil of damaged property, plant and machinery,” he said.Teh said mobile computing devices manufacturers would design more new products for solid state drives (SSD) as a result of the HDD shortage situation.

“This would give the solid state drive segment a competitive edge over HDD this year,” he added.
The supply of hard disk drive components has been disrupted by the floods in Thailand.

According to the recent report on solid state storage and hard disk drive by International Data Corporation (IDC), the floods in Thailand have disrupted the PC supply chain and the HDD industry's ability to supply the market in the near term.

“The original equipment manufacturers (OEMs) will certainly face unavoidable HDD shortages and higher HDD prices in the first half of 2012.

“These shortages will present a significant short term opportunity for SSD vendors as OEM customers look to SSD vendors to fill HDD supply gaps,” the report said.

According to HDD industry sources, the price of HDD sold to computer product manufacturers is expected to increase by about 10% this year due to the gradual restoring of full capacity production of HDD products.

AT Systemisation Bhd managing director Beh Lai Lien said the group's business in manufacturing disposable parts and components for the HDD industry would generate more than 50% of the group's revenue this 2012 financial year, compared with less than 50% in 2011, as it took advantage of the shortage in HDD components.

“We will pump in more funds to acquire new machinery for the business this year to increase the volume of production and higher value HDD disposable parts and components for our HDD manufacturers in the region,” he said.

There is expectation that HDD component manufacturers in Thailand will shift some of their investment to Malaysia this year due to the damage caused by the floods late last year. “This is one of the reasons behind the recent interest in technology stocks,” he said.

AT Systemisation produces HDD disposable parts and components at its plant in Bayan Lepas, Penang. According to a recent GfK Boutique Research forecast, the global spending on technology products will grow 5% in 2012 to US$1.04 trillion compared with 8% last year, which brought in US$993bil in sales.