Chips Play Hard On Disk Drives

For the last four weeks, there has been a severe shortage of hard disk drives (HDDs), causing prices to zoom by around 25 percent. If market sources are to be believed, the shortage will continue till early January.


Prices increased from Rs 3,900 for a 10 GB drive to Rs 5,000. While 20 GB HDDs were priced at Rs 4,800 only four weeks ago, they are being quoted at Rs 6,200 at present.


Market sources say that prices may go up further, until there is a steady supply of 20 GB HDDs. Prices for 10 GB are expected to peak at Rs 5,500, while 20 GB drives are likely to touch Rs 6,500.


Component shortage


The present shortage is being attributed to the short supply of a crucial component used in hard disks. This is also a vital component in the manufacture of mobile phones and CD-ROMs.


Talks in the market attribute the shortage to the shift in manufacturing from 10 and 15 GB models to 20 GB. It looks like HDD majors have stopped manufacturing 10 and 15 GB HDDs and are now focusing only on 20 GB HDDs and above. "In fact, 20 GB HDDs will become the entry level from now on," says Raj Saraf of Zenith. As of now, manufacturers are finding it hard to support the huge demand caused by the dearth of 10 and 15 GB HDDs with enough supply of 20 GB
HDDs.


Ramesh Jain, Marks Marketing, New Delhi, attributes the shortage to Seagate shutting down plants due to the high rejection rate of the Seagate 8.4 GB hard disk. "The company has recalled stocks to issue fresh ones. These factors have contributed to the shortage," he adds. Repeated efforts by CI to seek clarifications from Seagate’s Singapore office did not yield any results.


However, Rahul Bindal, Country Sales Manager for Quantum has clarified that the shortage has been caused because Texas Instruments, which manufactures chips used in HDDs, has failed to deliver enough stocks. "As a measure to overcome such a situation, we are working on the baseline of limited number of buyers and limited supply," adds
Rahul.


According to M S Bhalla of Samsung, both Seagate and Quantum source their critical components from Texas Instruments and Hitachi. The vendors have not been able to keep up with the demand. “And now the demand-supply gap has become so large that we are unable to fulfill it. The gap is unusually high," points out
Bhalla.


Rajesh Khullar of ACI Computers says, "The current shortage had to arise, the reason being diversion of critical components to the mobile phone and electronic toys industries." Narendra Dubey, MD, Cyberstar Infocom Ltd, a Bangalore-based distributor for Quantum agrees.


Diversion of critical components to mobile phone manufacturers seems inevitable, thanks to the phenomenal increase in demand for these devices worldwide. Not surprisingly, manufacturers seem to be diverting their stocks to this segment for higher returns.


But interestingly, CD-ROMs that also use the same components are not in short supply! CD-ROM prices too have not increased due to the short supply. Tejas Sheth of Zeta Technologies, a dealer in CD-ROMs and CD-RW drives says, "We have enough stocks even if a scarcity in this segment begins. And by the time we finish selling this, regular supply will resume."


However, Saurabh of Savex Computers has expressed fears that the CD-ROM market could be affected soon. He feels that "This shortage is extending to CD-ROM drives also. But in the case of Samsung drives, there is no shortage."


It may be recalled that CI had reported a shortage of peripherals such as monitors, hard disks, CD-ROMs, CPUs in May. The reason then was short supply of ICs. Even at that time, market sources had indicated that supplies were diverted for the manufacture of mobile phones.


If the ‘ICs’ story is true, resellers should, in fact, be concerned about the growing demand for mobile phones. According to various analysts, worldwide mobile phone sales will be at around 500 million units, by the end of 2000.


It is after a period of six months, that a similar situation has arisen. This only seems to indicate that manufacturers are not doing enough to increase supplies of critical components.


Christmas buying


According to market sources, Christmas buying in the West is also a contributing factor to the ongoing shortage. Apparently, supply has been diverted to those countries where Christmas buying has begun in full swing.


However, this is an annual trend which Asian businessmen are aware of. "Christmas buying could have added to the problem, but it can never be the only reason for the shortage. Every distributor and dealer is well prepared to face such a situation with enough advance stock for the season," says a distributor from
Mumbai.


But Ramesh Jain of Marks Marketing has another view. "India is too small a market for companies to divert stock from here to the US and European markets. I feel that the start of the festive season in those regions has not contributed to the shortage."


December hopes


As of now, nobody is sure about when the situation will come back to normal. But resellers are hopeful that supplies will resume in another two months’ time. They are hopeful that the shortage should begin to ease by January and it should be business as usual.


But it is clear that the hard disk shortage took most resellers by surprise. No vendor had a clue about the present situation. With the grapevine calling the shots in the market, such a hike is not surprising. Also, no vendor has officially increased prices.


"We have shared the reality with our distributors from the very beginning and that it is nearly impossible to fill the gap. As far as control over market price is concerned, there is a very little degree of control that we can exercise and prices are bound to go up," says M S Bhalla of Samsung.


Rahul Bindal, Country Sales Manager for Quantum says, "TI has not confirmed the normalcy in the production of the chip. So commenting on the stabilization would be difficult at this point of time."


Though resellers are happy making money with the available stock, it is those having large stocks who will really mint money until the situation improves.


Nelson Johny with inputs from Sunila Paul in Bangalore and our Senior Reporter in Delhi

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