iSuppli announced that it expects manufacturers of hard disk drives (HDD) to receive a late-year boost during the Christmas holidays as shipments rally in the fourth quarter.
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Unedited press release follows:
Hard Drives Have a Happy Holiday
El Segundo, Calif., December 15, 2010 — Manufacturers of hard disk drives (HDD) are expected to receive a late-year boost during the holiday season as shipments rally during the fourth quarter, according to market research firm iSuppli, now part of IHS Inc. (NYSE: IHS).
The rise in HDD shipments in the fourth quarter will mark the second consecutive period of growth following a decline in the second quarter. HDD shipments will reach an estimated 169.2 million units during the last three months of the year, up 2.2 percent from 165.5 million units in the third quarter. Revenue in the fourth quarter is projected to climb 2.1 percent, equating to $8.9 billion.
“The fourth-quarter increases in HDD shipments and revenue reflect positive developments on several fronts, including the stabilization of prices, strong demand from the enterprise segment and a return to normal inventory levels,” said Fang Zhang, analyst for storage systems at iSuppli.
The expected growth for the fourth quarter represents a smaller increase than in the third quarter, when shipments climbed 3.4 percent and revenue rose 3.1 percent. Nonetheless, the performance of the second half of 2010 is a major improvement from the first half. Shipments in the second quarter declined 3.0 percent and revenue fell 7.7 percent from the first quarter.
The attached figure presents iSuppli’s quarterly data on HDD shipments for 2010.
With their place still secure in the industry despite the small advances being made by the rival solid state drive technology, HDDs continue to be the main storage device of choice in both the consumer and enterprise segments. iSuppli expects HDD prices to remain flat through the remainder of the year as pricing pressure eases in the wake of continued strong demand, especially in the enterprise sector, and as manufacturers maintain tight control of inventory.
HDD rankings hold
Among the HDD suppliers, the rankings are expected to remain unchanged in the fourth quarter, with Western Digital Corp. preserving its leadership position in shipments for what will be the third consecutive quarter. A perennial runner-up in the past, Western Digital seized the top spot earlier this year after reaping the benefits of its lean operating model. The company will continue to try fending off the previous leader Seagate Technology LLC, now ranked second, from regaining the pinnacle.
Western Digital is expected to ship 51.5 million HDD units in the fourth quarter, up 1.7 percent from 50.7 million units in the third quarter. In comparison, Seagate is expected to ship 49.5 million HDDs, up a smaller 0.6 percent from 49.2 million units during the same period.
On the revenue side, the rankings are reversed, as Seagate is predicted to maintain its lead in the fourth quarter with sales of $2.8 billion—up 3.7 percent from $2.7 billion in the third quarter. Western Digital, which sells product in the consumer segment at high volumes but at lower prices, is expected to remain at No. 2 with revenue of $2.4 billion, up a scant 0.2 percent from $2.39 billion in the third quarter.
Hard drive challenges
Both Western Digital and Seagate have had their share of trouble. Seagate experienced some order weakness at the beginning of the third quarter, mainly from the consumer market in the United States and Europe, but then saw orders pick up at the end of the quarter. Western Digital believes that lower-than-expected demand early in the third quarter brought about high inventory for all HDD manufacturers. And while Western Digital was able to meet its low-end quarterly expectation, the company’s shipment and revenue market share actually declined from the previous quarter.
Rounding out the top five—with their rankings identically replicated across both the shipment and revenue categories—are Hitachi Global Storage Technology in third place, the combined entity of Toshiba/Fujitsu in fourth and Samsung Electronics in fifth.
Given the projections for a busy holiday season and solid enterprise demand, the rest of the year is likely to prove especially beneficial to Seagate and Hitachi. For the enterprise segment in the third quarter, Seagate enjoyed a 65 percent market share, while Hitachi had a 27 percent share.
Western Digital, on the other hand, can take consolation in knowing that pricing will stabilize as the year ends, which should temper the financial losses it suffered from pricing erosion in the third quarter.
Learn more about what’s happening in the storage industry with Zhang’s market brief entitled: Hard Disk Drive Manufacturers Receive Late Boost from Holiday Orders.
About iSuppli
iSuppli is the global leader in technology value chain research and advisory services. Services afforded by iSuppli range from electronic component research to device-specific application market forecasts, from teardown analysis to consumer electronics and from display device and systems research to automotive telematics, navigation and safety systems research. More information is available at www.isuppli.com and by following us at twitter.com/iSuppli
About IHS (www.ihs.com)
IHS (NYSE: IHS) is a leading source of information and insight in pivotal areas that shape today’s business landscape: energy, economics, geopolitical risk, sustainability and supply chain management. Businesses and governments around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS employs more than 4,400 people in more than 30 countries around the world.