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Analysts say that though the third quarter of 2011 was perhaps the best quarter ever for the PC market in terms of the number of shipments, rising hard drive prices, high inflation and the weakening of the rupee against the dollar is likely to make the fourth quarter weak.
“I am expecting the numbers to slide between 10 and 15 percent over Q32011. The hard drive shortage is a real crisis, and will affect both PC OEMs as well as system builders. Apart from that, prices are going up because of the rupee’s depreciation against the dollar,” says Vishal Tripathi, Principal Analyst, Gartner India.
Both Seagate and Western Digital have announced that the drive shortage will continue into Q12012 following the massive floods in Thailand, where close to 30 percent of drives are manufactured. The region is also responsible for 70 percent of the components that go into hard drives.
Hard drive prices, which rose by as much as 50 percent by the fourth week of October, shot up by 200 percent by the second week of November. “You could buy 500 GB SATA drives at $34 in quantities of thousands in the second week of October, but now it’s difficult to get shipments even at $108,” says J Ramesh, VP of Ralco Synergy, an independent distributor.
Meanwhile, UK-based Probrand, a leading distributor of Seagate, has published a report which states that the disk drive industry in Thailand would take at least 56 days to return to normalcy. The report says that this would affect normal supply well into the second quarter.
According to Ian Bowles, Director, Probrand, “Global demand for HDDs continues to grow, and in the last quarter hit 177 million units, which equates to 59 million units per month; this is forecast to hit 180 million next quarter. The impact of the floods is expected to cause a 20 million unit shortfall per month.”
Some system builders are even seeing the end of the road. “Till now, for a mainstream SKU, we were at least Rs 3,000 cheaper than an Acer or Lenovo. With the 500 GB price going up by Rs 3,000, whatever advantage we had on the price front has disappeared,” complains Sudhir Sankar, CEO, IBS Systems, a Bengaluru-based system builder. Toshy Mathew, CEO, ABC Systems, Kochi, agrees. “This short supply has spelt doom for assemblers. In Kerala, assemblers have a healthy market share of over 50 percent, but we see this slipping.”
In response to the shortage, PC manufacturers are planning to increase their prices. “The shortage of drives is affecting everyone, and will certainly affect our prices. No one is immune, including PC OEMs,” says Saji Kumar, Product Marketing Head, Acer India.
Inflation is cited as another reason for sluggishness in the market. “Post-Diwali there’s definitely been a slowdown in the market. Prices of commodities have shot up, customers have become wary, and this is affecting PC resellers,” says Kishore Makhija, MD, Priyanka Computer Services.
N Sivakumar, VP, Strategic Marketing, Product Management & Service, DS Division, Toshiba India, underplayed the emotions. “Q4 is traditionally a weak quarter in India. While prices will naturally go up because of factors such as the fall in the value of the rupee, this should be just a temporary aberration.”
Leading research agency 451 has forecast that the drive shortage would shift customers faster to flash and SSD drives. However, not too many in the Indian market are willing to buy the argument. Argues Ajay Kogta, Country Manager, Strontium Technology, “The present price of a 500 GB SATA drive is Rs 5,000 or so on the street. The price of a 128 GB SSD is still above Rs 10,000.” |