HDD industry hits reset on prices, markets, technologies post-floods

April 6, 2012 – BUSINESS WIRE — Hurt by the 3/11 Great East Japan earthquake and disastrous flooding in Thailand in late 2011, worldwide hard disk drive (HDD) unit shipments experienced a year-over-year decline of 4.5% in 2011. Efforts to clean and repair flooded HDD factory buildings and equipment will take most of H1 2012. HDD and HDD component production should return to pre-flood output levels in H2, reports International Data Corporation (IDC).

IDC forecasts year-over-year HDD unit shipment growth of 7.7% in 2012, with a compound annual growth rate (CAGR) of 9.6% for 2011-2016. IDC expects year-over-year HDD revenue growth to exceed shipment growth in 2012. HDD prices are higher following the supply chain imbalance caused by Thai floods. HDD vendors are taking advantage of this opportunity to reset prices and recover some of the excessive price erosion that began in 2009. Also read: Seagate ousts Western Digital after Thailand floods

Assuming the industry is successful with hybrid solid state hard drives (hybrid SSHDs), industry revenue could approach $50 billion by 2016 with a 2011-2016 CAGR of 8.6%.

"A reset of the HDD industry structure should allow for the remaining HDD industry participants to slowly reduce HDD prices from current levels at a rate that still delivers value to customers, while at the same time ensuring sufficient funding is available to develop new HDD technologies that are needed to improve HDD capacity, performance, reliability, power consumption, and security,” said John Rydning, research vice president, Hard Disk Drives at IDC. Long-term revenue growth is dependent on the remaining participants transforming into storage device and storage solution suppliers, offering a broad range of products for various markets.

One of the major themes affecting the HDD forecast is the shift in demand for HDDs in client devices. While PCs will continue to represent the largest market for HDDs in terms of unit shipments, revenue derived from HDDs shipped for PCs is projected to decline over the next five years. In contrast, HDD demand from personal storage, entry-level storage, and enterprise applications (combined) is increasing. This reflects the broader trend to store more content in large datacenters and centralized storage devices in the home or in small businesses, thus making content accessible to a wide range of consumption platforms, including media tablets, smartphones, PCs, and other connected wireless devices. The longer-term implication is that enterprise storage — as opposed to storage in PCs and CE devices — will at some point become the major consumer of HDDs, as it was early in the life of the HDD market.

Another important theme is the intensifying battle with solid state drives (SSDs) in notebook PCs. While SSDs offer some performance advantages over conventional HDDs, SSD pricing continues to be an inhibitor to adoption in new PCs. Another way to achieve faster PC performance without incurring the full costs of SSD is to use a smaller amount of NAND somewhere in the PC system in combination with rotating magnetic disk storage. To win this battle, HDD vendors will need to convince PC manufacturers that hybrid SSHDs offer a more cost-effective solution to improve PC performance and responsiveness than other solutions.

The IDC study, Worldwide Hard Disk Drive 2012-2016 Forecast: The Industry Hits the Reset Button (IDC #233547), provides insight into hard disk drive industry shipments and revenue for the 2012-2016 forecast period. Trends in end-market devices affecting HDD demand are assessed while HDD technology advancements are factored into expected average HDD capacities. The HDD industry structure and relevant industry dynamics along with expected new HDD product features are used to estimate average sale prices and industry revenue. International Data Corporation (IDC) a global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. Access reports by visiting www.idc.com.

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