The current chip shortage in the industry is one of the worst in history. The pandemic caused many manufacturers to misjudge the possible drop in demand, and some have been left with less capacity. To this is added the new criptomonedas boom, which has made it impossible to do with a graphics card at a reasonable price in the last half year. Now, the new threat looming over SSDs and hard drives has caused the two largest manufacturers to increase production.
The demand for hard drives and SSDs has skyrocketed due to Chia , the cryptocurrency that is mined using Proof of Stake instead of Proof of Work . In Proof of Stake, it is mined by participation in the network, while in Proof of Work, such as Ethereum or Bitcoin, it is mined by “effort” and processing capacity, which consumes more resources. Although the idea behind Chia is to reduce interest in other cryptocurrencies that consume more energy, the reality is that what it has generated is a shortage in the field of storage.
Seagate and Western Digital increase production
For this reason, Seagate and Western Digital have announced that they will increase the production of high-capacity hard drives to further take advantage of their production lines. However, both companies say that they will not open new plants to increase their capacity, so the increase in production may not be enough to cope with the increase in demand.
Hard drive manufacturers sell most drives to large customers, such as Amazon, Google, or any company with cloud storage, so they are required, by contract, to ship those drives upon prior agreement. In addition, both companies have been reducing their production of hard drives in recent years, closing plants because consumers increasingly choose to use SSDs instead of hard drives (although the latter are demanded to make homemade NAS), keeping the hard drives especially for large clients.
They do not trust to create new factories
However, manufacturers were not expecting this large increase in demand, where Chia’s network already has 20 Exabytes of capacity . The figure, to put it in context, is somewhat less than 10% of the total capacity distributed by the manufacturers in the first quarter of 2021. It must be taken into account that many users use hard drives that they already have, and that they have to repair a disk hard is easier than an SSD.
Thus, if until now for example Seagate and WD were using their factories at 90% of their capacity , now they will be squeezing them a little more to get practically 100%. Looking ahead to the next two or three quarters, if they see a business opportunity, they could increase the capacity of the factories or even open new ones.
The problem is that it is difficult to estimate if it will be viable in the long term as a cryptocurrency or if it will fall into oblivion. For now, WD sees it as short-term. One of the reasons why demand could fall is if the available capacity in Chia’s network stabilizes because it is no longer profitable to participate in the network because the probability of receiving a coin falls.
