Storage update: 3 TB drive rumors affect market pricing

USA: According to Converge Market Insights, higher-capacity 3.5" desktop SATA HDD pricing continues to drop.

In our last Market Insights we reported a price drop in the 1.5 TB and 2.0 TB capacities. Now these price declines are occurring in the 750 GB and 1 TB drives as well. The 750 GB models are selling in the high $40 to low $50 range, and 1 TB drives can be purchased in the low to mid $60 range.

Meanwhile, the 1.5 TB has dropped to the high $80 range, and 2 TB can be found at around $120. Converge believes this is due not only to the seasonal slowdown in the HDD market but also to reports that a 3 TB model will be introduced in the market later this year.

Additionally, analysts are reporting that the big PC builders are pressuring the major HDD manufacturers for improved pricing after seeing HDD margins soar in 2009 while experiencing slim margins themselves.

As a result, we expect the pace of this erosion to continue through May and into June. While price is eroding in the higher-capacity 3.5" desktop SATA HDD, this has had little effect month over month on the lower capacities, with prices off by only $1 to $2 on 80 GB through 500 GB drives.

Activity in the enterprise market is heating up, with the SATA interface emerging as the preferred interface. The higher-capacity ranges coupled with lower costs have significantly displaced the SCSI and Fibre Channel HDDs.

Manufacturers continue to push development of larger-capacity, faster and quieter offerings in the SATA interface. In April’s Market Insights report, we noted the release of Western Digital’s newest addition to the Velociraptor line — a 600 GB, 10K RPM, 32MB, 2.5" SATA HDD. As previously mentioned, Seagate is believed to be releasing a 3 TB 3.5" HDD later this year, to be followed by a 1 TB 2.5" model.

However, the SAS drives are slowly gaining favor in this space. They can’t compete dollar for dollar on cost per drive with SATA. However, the available speeds per capacity, as well as reliability, are justifying price for some and thus gaining favor and market share.

Finally, the IDE shortage continues. This is most evident in the 2.5" FF, resulting in soaring open market prices. This was reported last month and remains unchanged. Prices are up $5 to $7 per capacity. The 40 GB, 60 GB and 80 GB 5400 RPM models are selling for approximately $27, $30 and $36, respectively. With demand unlikely to change any time soon, we expect pricing to remain elevated for several months.