EMC and HP Increasing HDD Prices

Chris Mellor, journalist at El Reg, got two documents revealing that EMC and HP increase the prices of their HDDs following Thailand flooding.

Key extracts from the letter by Tom Joyce,
VP for marketing, strategy and operations in HP Storage:

According to IDC, Thailand accounted for 40-45% of worldwide HDD production during the first half of 2011. Many factories have been flooded, and in others production has been impacted due to power outages and work stoppages. Approximately half of Thailand’s HDD production capacity has been impacted by the flooding.

The magnitude and duration of the disruption will not be clear until the floodwaters subside, but the industry is already experiencing severe shortages of certain HDD components. In particular, large-capacity SAS and SATA drives are in short supply. HP is working closely with our suppliers to maximize our access to these HDDs. We have a significant advantage in this environment due to our world-class supply chain; however, worldwide output will clearly be much lower than worldwide demand.

This reduction in available supply is causing immediate and significant increases in the prices that HP and all other vendors pay for hard disk drives. Component prices have already increased approximately 20%. In this context HP will be forced to increase the prices that we charge for certain disk drives.

We are hopeful that this crisis will come to an end soon. We are doing everything in our power to gain access to sufficient HDD supply so that we can help you fulfill your requirements. We are also prepared to engage with you to explore alternate solutions where appropriate.

Letter from Gregg Ambulos, SVP Global Channel Sales,
EMC Corporation to Velocity channel partners:

Attention:
Important Change to Drive Pricing in January 2012

The tragic, persistent flooding in Thailand has impacted the cost of hard disk drives in the global marketplace. EMC typically adjusts drive pricing on a quarterly basis, passing through cost changes from our suppliers, usually in the form of lower drive prices. In Q4, EMC did just that, absorbing the cost increases in order to shield our partners and customers from the impact of higher drive pricing.

We have determined however that we must raise prices in Q1 for an indefinite period of time in order to offset the continued high drive prices we are seeing from our primary suppliers. As a result, our Q1 2012 HDD list prices will rise between 5-15% over Q4 2011 levels. This increase will apply to HDD list prices across all EMC business lines.

All current pricing will be honored until the end of 2011. This increase will not take effect before January 1, 2012. While we hope that this increase is temporary, at this time we cannot forecast how long the flooding in Thailand will impact HDD pricing.

Please prepare your customers for this increase. Do not allow them to be surprised by the increase after it takes effect. Please direct any questions to your EMC Distributor or EMC Channel Account Manager.

Thank you for your continued support and partnership.

Read also:

EMC Eyes Rapid Industry Recovery From Thai Floods
Thinks CEO Tucci.