Disk drives will become more dense and less expensive in 1998, which is good news for everybody but manufacturers.
Hard drives, like memory chips, are expected to continue to decline in price next year even as the technology improves and sales increase, say analysts.
As with memory, price erosion stems from an imbalance of supply and demand. Demand is actually quite robust, with disk shipments increasing by more than 21 million this year according to various estimates. Unfortunately, a recent rush to fill that demand by established as well as new manufacturers has created a glut.
That is good news for consumers who will get more storage for less, said Jim Porter, president of Disk Trends, a Mountain View, California-based research firm specializing in storage.
"In 1997, OEMs were paying on average about 8 cents a megabyte [for storage products]. In 1998, that should go to around 7 cents," said Porter. "In 1996, they paid 13 cents a megabyte." Typically, a drop in the manufacturer's purchase cost leads to a drop in consumer prices.
One of the big events for consumers, he said, will be the shift toward 2.1 GB platters. Platters are the building blocks of disks. The average hard drive contains two platters, while drives for higher-end machines can contain three to five platters.
Currently, most commercial hard drives use platters that store 1.7GB of information. 2.1GB platters, which are now manufactured in limited quantities, will start to find their way into standard product lines during the first two quarters of 1998.
While the shift may actually result in a slight increase in the total price for cutting-edge disks, consumers will pay less per megabyte for storage because of the jump in capacity. The typical 3GB hard drive will become the 4GB hard drive, Porter pointed out, and sell for close to the same price.
At the same time, this year's 3GB disk will become very cheap. Manufacturers will begin to heavily discount disks based on the current 1.7GB technology when more of the 2.1GB platters are available, Porter said.
Pricing pressures will also likely continue to be a feature of the market because of the surfeit in supply. Seagate Quantum, and Western Digital all warned that earnings would be lower than expected for their respective current quarters due to pricing turmoil. Seagate further said it planned to shut down its plant in Ireland in the first quarter as way to cut costs.
Despite the glut, the number of drives going out the door continues to grow. Alexa McCloughan, a storage analyst with International Data Corporation, said unit shipments went up 27 million this past year. Porter said shipments went from 105 million in 1996 to 126 million units.