https://www.reddit.com/r/chia/comments/n2lren/thoughts_on_a_hdd_shortage_from_an_industry/ Press J to jump to the feed. Press question mark to learn the rest of the keyboard shortcuts [ ] Log InSign Up User account menu 291 Thoughts on a "HDD shortage" from an industry insider. [renderTimi] Close 291 Posted by6 hours ago Helpful3Wholesome3Silver3Hugz Thoughts on a "HDD shortage" from an industry insider. [renderTimi] I work in the HDD industry. The below is my personal opinion, informed by what I know of the industry, but not the official position of my employer or any of our suppliers. I've seen the question asked here of could there be an HDD shortage and what that would look like. I'll state some facts about this industry: * There are basically three players; Western Digital, Seagate, and Toshiba. There are very high barriers to entry and it is not possible for some new competitor to suddenly start manufacturing large amounts of HDD storage. * The supply chains for these three companies are not directly interchangeable. A component designed for a WDC drive cannot be used in a STX or TOS drive. * The critical component in the supply chain is read/write heads. Heads are built in specialized factories and those factories are running close to capacity with little headroom. Once at capacity, the industry cannot suddenly supply more heads without investment in building new factories, and that investment won't come if the perceived demand is short-term. * What the industry can do is shift head allocation to higher capacity drive. Sometimes it takes just as many heads to make an 8 TB drive as a 16 TB drive. We could make fewer 8 TB and more 16 TB if the demand shifted from "drives" to "capacity". * No matter how you slice it, if there is sustained new demand for more capacity, there will need to be a price adjustment upwards until more head manufacturing capacity can be developed. Now let's talk about the market: * HDD manufacturers sell to three kinds of customers: OEMs, cloud, and channel. * OEMs are people like IBM, Dell, HP, etc. They purchase HDDs as a component for the systems that they then sell to their end customers. OEMs are not the final consumers of these HDDs. * Cloud are people like Facebook, Alibaba, Amazon, etc. They purchase HDDs for their own direct consumption in their data centers. * Channel is the entire set of wholesalers and retailers that sell HDDs to consumers or to smaller companies that don't have an OEM relationship with a HDD maker. The "shortage" that is being reported right now is simply all the drives being sold out of the channel. There is no shortage of drives being sold to OEM or Cloud customers. We have long-term contracts with those customer where they have forecast demand months in advance and we have products in the pipeline to supply them. What does this all mean - is a HDD shortage really possible? * Yes, it is possible for the channel to get depleted, which would lead to higher retail prices. This is simply because the channel demand has suddenly exceeded channel supply. * The industry can increase allocation to the channel but we don't have a lot of spare capacity. Once factories (especially head factories) are running at capacity we can only allocate to channel by moving supply from OEM/Cloud. This would produce some price pressure. * We can't always just move supply away from OEM/Cloud. The contracts with these customers last for multiple years and contain price and supply guarantees. * If capacity demand exceeding supply becomes a new trend then it can only be addressed by shifting the product mix to higher capacity drives and then building new component factories. If there was a shortage what would it look like (I don't personally think there is going to be a significant shortage of HDDs): * A Chia-led shortage it manifest itself in the channel, with retail hard drives selling out. It would not impact supply to OEM /cloud in the short term due to contractual obligations and how the markets work. * Hypothetically (this is very speculative) there could be a short-term situation where the only way for a consumer to buy a hard drive would be to buy a system from Dell/HP/etc, pull out the drive, and scrap/sell the rest. Edit: I want to add a point. The above is my opinion of a HDD shortage happening in the near future based on what Chia is doing now. Some people have asked me "what if Chia takes off", which is a different question. The current Chia network of <2 EB is nothing. I'd bet the industry could sell 10+ EB to Chia over the next year with no problems other than some local market distortions. But yes, if this thing starts trying to grow by 5 EB a month shortages will develop. OEM/Cloud customers will be protected at first due to some longer-term agreements but price will have to move up if Chia became material to the total demand. Supplies would remain tight until the industry perceived the demand was permanent and responded by building more production capacity. 63 comments share save hide report 99% Upvoted Log in or sign up to leave a commentLog InSign Up Sort by best View discussions in 2 other communities [renderTimi] level 1 6 hours ago Appreciate the insight! Super valuable, and helps people reframe. Thank you 24 Reply Share ReportSave level 2 4 hours ago More power to the Cloud! Decentralization, they said... Independence, they promised... 1 Reply Share ReportSave Continue this thread level 1 2 hours ago Interesting, thanks. Can you explain why the pricing of external hard drives in enclosures is lower than that of the bare drives, to the point that "drive shucking" has become a cottage industry? 8 Reply Share ReportSave level 2 Original Poster1 hour ago At heart it is an example of differential pricing in action. Why does one person pay $6 for a whopper meal while another person pays $3? Because Burger King has figured out how to sell the same product at two prices. It really doesn't hurt WDC/STX if some number of drives get sold at a lower price point. Whoever buys those and shucks them has to get over the hurdles of inconvenient procurement and lack of warranty. The drive manufacturers have complete control over how many drives get sold into the enclosures and can protect their core business. There is also the overall relationship with the retailer to consider. Selling deeply discounted drives to BestBuy for their Black Friday sales can get you preferential treatment - things like better shelf positioning, promotion on the bestbuy.com website, endcap displays etc. 7 Reply Share ReportSave level 1 5 hours ago What percentage of these companies profits come from channel 7 Reply Share ReportSave level 2 Original Poster5 hours ago 25-30% 7 Reply Share ReportSave Continue this thread level 1 5 hours ago It is in kind of happening already at least in the short term. Right now I don't see a way to source 18 TB drives anywhere near MSRP. I don't know what else to say thats that. Maybe the pressure alleviates in late summer. 5 Reply Share ReportSave level 1 5 hours ago One other thing you left out: according to statista.com, Seagate alone shipped >365 EB of storage in the last year. If that volume were spread evenly over the year, that represents 30 EB per month. That would make the entire Chia net space a 3% increase in storage volume sold. (Probably closer to 1.3% if we account for the other two vendors.). Contrast this with the Bitcoin/Ethereum run on graphics cards where the demand nearly doubled. Edited to remove extraneous decimal point. I doubt this has a significant long term impact on drive availability. Probably just a short term impact to supply chains. 5 Reply Share ReportSave level 2 Original Poster4 hours ago * edited 4 hours ago You are correct. Data center storage growth is round 2-2.5 EB/day. The 1.4 EB used by Chia so far is less than one day's data center growth. Chia right now is trivial in the grand scheme of things. If the network grows to 100 EB this year that would be pretty consequential. Time will tell. 6 Reply Share ReportSave level 2 3 hours ago * edited 3 hours ago Growth of the netspace doesn't give us a clear view. I can't purchase 3 16tb drives and immediately increase the netspace by 48tb. Netspace growth isn't a good correlation. Chia's coin price will better represent potential demand. 3 Reply Share ReportSave level 2 2 hours ago Chia Network is still in its early stage. If the coin price stabilizes above $500, it will make farming chia profitable even with a net space of 150 EB. 3 Reply Share ReportSave level 1 5 hours ago It's basically the same with GPU's. The retail cards are sold out instantly, however the OEM's building prebuilt systems still get the same amount of cards, regardless if the retail market is sold out. They don't want to run 10's to 100's of OEM companies out of business due to lack of inventory, so they will not "steal" the cards that Dell or whoever is suppose to get, just because BestBuy or ?? has ran out of product. That being said, buying a $3,000 computer to get a $2,000 GPU is slightly nuts, but to buy a $1,000 computer to get a $100 drive would be flat out crazy. 5 Reply Share ReportSave level 2 Original Poster4 hours ago That being said, buying a $3,000 computer to get a $2,000 GPU is slightly nuts, but to buy a $1,000 computer to get a $100 drive would be flat out crazy. It is hard to imagine, but people sometimes do irrational things. 3 Reply Share ReportSave Continue this thread level 1 5 hours ago You've just validated what I've been saying these past few weeks!! Maybe the most sane, grounded, and reasoned thoughts I've seen on reddit in a LOONG while!! Thanks for taking the time to put it in writing!! 7 Reply Share ReportSave level 1 5 hours ago Do the contracts prohibit cloud customers from boxing up some of their drives and selling them in the retail channel? There may be a point where the markup they could get for a drive is much higher than the revenue from using it in the datacenter. And they could bump up cloud pricing as well. 3 Reply Share ReportSave level 2 Original Poster5 hours ago * edited 4 hours ago I am not privy to the inner workings of the cloud contracts so I don't know if there is a prohibition. However: * Sometimes these products are different: custom firmware or oddball capacities. * Cloud vendors are buying them because they need/want them. By reselling them they wouldn't be able to satisfy their internal needs. What you propose would also need some problem solving by the cloud customers: * They don't receive drives in retail packaging. They would need to source suitable packaging, and go through the work of repackaging to sell into the retail channel. * These drives would not have retail warranty or retail part numbers. * The cloud companies don't have the business relationships with the channel. If storage became this valuable, the cloud vendors natural approach would be tell farmers "bring your farming to the cloud". 8 Reply Share ReportSave Continue this thread level 2 4 hours ago It would seem remarkably short sighted for AWS to say "naw, we aren't going to launch that new region in Singapore, instead we'll make a mint selling a few more WDC drives next quarter. Screw the enormous investment we made in building that new data center". Or Google saying "That new version of Android? Forget it. We don't have the capacity to host the assets on our CDN because we're making great markup on 18TB HDDs on our new EBay storefront". 3 Reply Share ReportSave Continue this thread level 1 5 hours ago Fucking awesome post. Thank you 3 Reply Share ReportSave level 1 1 hour ago Thanks for the insight. One question on a related subject: why are enclosure drives cheaper than only-drives if it's the same channel? 2 Reply Share ReportSave View Entire Discussion (63 Comments) More posts from the chia community Continue browsing in r/chia Subreddit Icon r/chia Welcome to /r/Chia! This subreddit is dedicated to open discussion of Chia cryptocurrency and any news related to the project. We believe that cryptocurrency should be easier to use than cash, harder to lose, and nearly impossible to steal. Anyone who wants to validate transactions should be able to farm without single-use hardware or a big electricity bill. 14.9k Members 2.2k Online --------------------------------------------------------------------- Created Dec 22, 2010 Join helpReddit AppReddit coinsReddit premiumReddit gifts aboutcareerspressadvertiseblogTermsContent policyPrivacy policyMod policy Reddit Inc (c) 2021. All rights reserved Back to Top