Why Disk Storage Prices Continue to Drop

Prices for disk storage hardware keep slipping downward. Who knows when this trend is going to change?

Samsung’s and Seagate’s assembly factories in the Far East apparently have become so much faster and more effective in recent years that an oversupply of products is the root cause of this price–and margin–slippage. Good news for the big systems makers, certainly, and for consumers in general, but not particularly good news for the hardware makers themselves.

Matt Bryson, a storage analyst at Avian Securities, sent me a note on this subject today.

“Apparently a bunch of Samsung product hit the market last week. In part as a result, we’ve gone from an undersupply situation to oversupply in the past two weeks across higher capacity products (320 GB+),” he wrote. “I’m still waiting for a bit more insight on the magnitude of the price declines across all capacities, but it sounds like 1 TB dropped roughly 10 percent, and I would not be surprised if Seagate 750/500 GB drives are down by a similar amount.

“The recent price declines shouldn’t have that significant an impact on this quarter. Rather, we will see more of an impact in Q2 as oversupply in March allows OEMs more leverage in price negotiation. In my opinion, we are still looking at typical seasonality (both Q1 and Q2).

“Finally,” Bryson continued, “Samsung is still working on ramping their three-platter 500 GB [drive], and it sounds like they will actually ship real product next month, which will surprise many in the industry who thought this product line was stillborn. Also they have 7,200 RPM 250/320GB product slated to hit the market in April and May.

“In my mind, this product schedule indicates that even though we are seeing some excess Samsung supply right now, they are still focused on pushing an advanced product roadmap rather than trying to grab share. As such, I do not at this point expect aggressive behavior to last much beyond the current seasonal weakness.”

Stay tuned. There is lots going on here.