HDD Market Brief April 2016

19:06 26 April in Hard Drives

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Market:

Quarter 1 2016 Hard Drive volumes retreated 11% from quarter 4 2015. As demand drops we expect pricing to increase (opposite of standard supply and demand equation) driven by lower capitalization utilization rates resulting in increased overhead expenses and unit pricing. Hard drive manufacturers are utilizing their oligopoly position to manipulate pricing to relieve gross margin pressure.

Western Digital raised price across all caps and is expected to try to hold pricing through out the qtr. We see them as having the strongest position in the market with the Hitachi acquisition and consolidation.

Hitachi followed suit with Western Digital and raised all pricing on prime products. They also re-bid their entire recertified product which leads to 10%-15% increase in the secondary channel. We expect them to maintain pricing through out the quarter outside of spot excess deals.

Toshiba raised pricing on all of its notebook products. However, due to their limited market share they have had very little impact on desktop/enterprise market.

Seagate has the opportunity to play the spoiler. Seagate Has NOT yet raised pricing but everyone within the industry is expecting them to. The company missed forecast which lead to a 20% decline in the stock. While the market is expecting them to raise pricing we are not certain on that. Seagate might opt to keep pricing low to increase valuable market share.

General Thoughts– after a very difficult quarter for storage manufacturers we feel prices will trend upward as manufacturers try to fortify their balance sheets. However, we expect little impact on available supply. Seagate is the wild card in the market in┬ádetermining if the price increases will hold.

Horizon Technology
http://www.horizontechnology.com

Stephen Buckler

stephen.buckler@horizontechnology.com