The demand for hard drives and SSD has been triggered because of Chia, the cryptocurrency that is mined by 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 decrease interest in other cryptocurrencies that consume more energy, the reality is that what has been going to generate is a shortage in the field of storage.
Seagate and Western Digital increase production
Thus, Seagate and Western Digital have announced that they will increase production of high-capacity hard drives to further exploit their production lines. However, both companies affirm that they will not open new plants to increase their capacity, so the production increase it may not be enough to cope with increased 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 gone reducing your hard drive production in recent years, closing plants due to the fact that consumers increasingly choose to use SSDs instead of hard drives (although the latter are demanded to make home NAS), leaving hard drives especially for large customers.
They do not trust to create new factories
However, manufacturers were not expecting this large increase in demand, where the Chia 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.
So, if so far for example Seagate and WD they were using their factories at 90% 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 whether it will be viable in the long term as 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.