Assessing the impact of thailand flooding on 2012 DVR sales
Since late October there has been quite a bit of speculation about hard drive (HDD) prices in 2012 and their impact on DVR shipments and revenues. Record floods in Bang Pa-in, Thailand, severely damaged several major HDD assembly facilities, and HDD production capacity is unlikely to reach pre-flood levels for at least one year. Western Digital and Toshiba, two of the world’s largest hard drive manufacturers, together produce more than half their total hard drive volume in Thailand, and both companies have lowered production forecasts for the remainder of 2011 and 2012. Seagate’s HDD production facilities have been virtually untouched by the floods, but the company has reported significant disruptions to HDD shipment volumes as a result of damage to the larger supply chain and ecosystem. Bang Pa-in and the surrounding area is home to a number of component manufacturers that supply electrical motors, suspension assemblies, electrical wiring, and heat sinks used in HDDs. Set-top box manufacturers, and especially operators, are bracing for a painful DVR price hike in 2012.
A very limited, very valuable HDD supply could affect the global set-top box ecosystem in a range of ways. Set-top box makers could keep DVR prices level with 2Q 2011 levels and eat the HDD price increase in order to retain the most price-sensitive operators. What is more likely is that STB makers will pass most of the price hike from HDD manufacturers onto operators. Seagate, which supplies a number of major STB manufacturers, has indicated that its clients in multi-year contracts can expect a price increase of around 20%. Major set-top box suppliers have been mum about how exactly they’ll weather HDD market fluctuations, but it’s likely that operators and possibly consumers will have to absorb a price hike in 2012. Operators with major planned 2012 roll-outs, such as Comcast and DirecTV, may have to be flexible about prices in the short term; other operators are expected to rely more heavily on existing DVR inventories and/or delay new roll-outs.
IMS Research is being very conservative with DVR price hikes in the short term, because the amount of hard data on precisely what operators and STB makers will pay for DVRs is very small. November updates to the Online Set-top Box and iDTV Database keep DVR prices fairly close to pre-flood levels, but the January update will include more research on the impact of the Thailand floods across the STB and HDD ecosystem.