Seagate: HDD Production Won't Return to Normal For 1 Year
Hard drive production may be back to pre-flood levels by the end of 2012, claims Seagate's CEO.
Wednesday Seagate Chief Executive Officer Stephen J. Luczo said that Wall Street analysts are talking nonsense when they say that hard drive production will be back to pre-flood levels by next summer. In fact, he's predicting a difficult road ahead for the industry given that many of Seagate's own 130 or so suppliers are still under three feet of water.
"This is going to take a lot longer than people are assuming, until the end of 2012 at least," he admitted. "And by then, demand will have gone up."
The flooding in Thailand is currently affecting an infrastructure that produces around 40-percent of the world's hard drives sold by Seagate, Western Digital and Toshiba, thus pushing average hard drive prices up by 20-percent. That said, industry production this quarter is expected to be 50 million drives shy of the 180 million target.
"It’s going to be very interesting to see who gets drives and who doesn’t," Luczo said, adding that customers are suddenly eager to stockpile some of Seagate's load of drives already manufactured even though they sport higher prices.
"Some have offered $250 million upfront," he told Bloomberg.
But there may be a positive side to the story... at least for hard drive manufacturers. Luczo indicated that the flood has seemingly made the industry a bit more appreciative of hard drive manufacturers. The floods have even given Luczo more leverage on prices, but he's willing to settle on a 20-percent hike for those who commit to one- to three-year contracts rather than raise prices 40-percent across the board.
"People are going to appreciate the complexity of this business," he said.