BIts per square inch vs. Dollars per GB

A valid criticism of my blog posts on the economics of long-term storage, and of our UNESCO paper (PDF), is that we conflate Kryder's Law, which describes the increase in the areal density of bits on disk platters, with the cost of disk storage in $/GB. We waved our hands and said that it roughly mapped one-for-one into a decrease in the cost of disk drives. We are not alone in using this approximation, Mark Kryder himself does (PDF):

Density is viewed as the most important factor ... because it relates directly to cost/GB and in the HDD marketplace, cost/GB has always been substantially more important than other performance parameters. To compare cost/GB, the approach used here was to assume that, to first order, cost/GB would scale in proportion to (density)^-1

My co-author Daniel Rosenthal has investigated the relationship between bits/in² and $/GB over the last couple of decades. Over that time, it appears that about 3/4 of the decrease in $/GB can be attributed to the increase in bits/in². Where did the rest of the decrease come from? I can think of three possible causes:

• Economies of scale. For most of the last two decades the unit shipments of drives have been increasing, resulting in lower fixed costs per drive. Unfortunately, unit shipments are currently declining, so this effect has gone into reverse.
• Manufacturing technology. The technology to build drives has improved greatly over the last couple of decades, resulting in lower variable costs per drive. Unfortunately HAMR, the next generation of disk drive technology has proven to be extraordinarily hard to manufacture, so this effect has gone into reverse.
• Vendor margins. Over the last couple of decades disk drive manufacturing was a very competitive business, with numerous competing vendors. This gradually drove margins down and caused the industry to consolidate. Before the Thai floods, there were only two major manufacturers left, with margins in the low single digits. Unfortunately, the lack of competition and the floods have led to a major increase in margins, so this effect has gone into reverse.

Thus it seems unlikely that, at least in the medium term, causes other than Kryder's Law will contribute significantly to reductions in $/GB. They may even contribute to increases. We have already seen that even the industry projections have Kryder's Law slowing significantly, to no more than 20% for the next 5 years.