The New HardDrive Cartel

It seems that although Seagate's production plant was not a victim of the floods last year that reduced HD supplies and increased HD prices dramatically, they are raising their prices as well. 


Story HERE

-D

A cartel implies that there is collusion between companies to set a price. In this case there need not be price fixing for all involved to raise their prices.
 
Hard drives are all functionally equivalent (like gold, or the same grade of oil) so the high price of hard drives is a function of demand exceeding supply. That situation allows everyone with a hard drive to extract a higher price from those who need one. Yes, Seagate has to scramble for hard drive components due to the flooding, but even if they did not, they can see the opportunity presented by the shortage. Virtually all of the price increase in this circumstance will go into profits, either to the manufacturer or those further down the supply chain. Nor do all of the increased profits go to the manufacturers who are unaffected. The per-unit price of the remaining inventory, and limited production for those manufacturers more severely affected by the flood will also increase. This will be only partially offset by repair costs (which can be amortized over years) and will be bolstered by lower labor costs at closed factories.
 
And as the article hints, it gives suppliers an opportunity to create relationships with favored customers who will pay somewhat less than the peak spot-market price for their drives now and agree to pay more than necessary in the future to have a secure supply now. These long term committments to buy drives will tend to act as a ratchet to hold the price high even after some of the shortage is alleviated.
 
Without any need to talk to one another the involved parties will realize that it is in their own interest to hold the higher prices/profit margins in perpetuity. Some reduction in prices is inevitable, but given the substantial costs of ramping up the industry, and the recognition that the public will pay much more than the old price for drives, the days of hard drive price wars are probably numbered.
 
A good historical example is the price of motorcycles following the institution of a 100% tariff on imports in order to protect Harley Davidson in the 1980's. Japanese bikes were selling at less than half the price of a Harley for a similar machine, but when Harley regained market, and the tariff was revoked, the foreign manufacturers had learned how much Americans would pay for a bike..and Americans have been paying the higher price ever since.
 
A similar non-cartel price gouging is found in the oil refining industry without the assistance of government or a flood. Every refiner (or potential refiner) looks at the high cost of increasing capacity (billions for a refinery) and decides that it would be a foolish inverstment to the extent that it would increase production and flood the market making the new oil less expensive/profitable.
 

Yea on the enterprise side they are definitely looking to use the fear to drive long term commitments. You can't build "the Cloud" on SSDs and unicorns yet and the cloud is the big driver for the enterprise market.