Horizon Hard Drive Market Brief May 2016
Market– the hard drive landscape is quickly changing as SSD volumes continue to grow across all categories and hard drive unit volumes shrink. Hard drives are a declining market, but they are not going away. The manufacturers are taking steps to regain their footing. They have raised prices, reduced SPA (special price allowance), and cut operational expenses and capacity to shore up the balance sheet. Prices are holding, for now, but there is a lot of uncertainty going into Q3.
Western Digital – has maintained pricing throughout the quarter. Distribution is seeing little to no SPA (special price allowance) on any high-capacity product.
The RED product line is the most sought after line in the open market, and we are seeing demand outstrip supply for 6 TB reds.
Western Digital has already gone through a round of layoffs, and we expect more as they continue the Hitachi integration. They have also completed the SanDisk acquisition, which gives the market a much clearer sightline into the future.
Hitachi – has also successfully held pricing. As stated above, we expect layoffs and cost cutting within Hitachi.
We are seeing strong market demand for Hitachi 4TB SATA drives, and we are seeing demand pushing pricing.
Hitachi has released it 10TB helium drive. With SSD chasing after their heels, is this the future of rotating media, niche enterprise drives?
Toshiba – with its limited market share, Toshiba is relegated to the back seat. Rumors continue to circulate that Toshiba will be out of the HDD market within the next 12-18 months. With their limited market share and quickly changing market conditions, it would not be surprising to see Toshiba cut their losses. If they bow out, we expect no significant impact on the market.
Seagate – continues to be and will be the “Wild Card” over the quarter. While they have pulled back their SPAs and have raised pricing, it is unclear if they can hold this position. From an outsider view, Seagate is in a state of flux. They are losing market share, there are rumors of layoffs, and they seem to have no strategy to handle the market transition to SSD.
We have also seen select Seagate products enter the market at below market pricing, which may be Seagate quietly moving product into the market, without wanting to impact recent price increases. Clearly, this needs to be watched as a leading indicator on the direction pricing will take. We think, towards the end of the quarter, they will lower pricing to gain market share.
General Thoughts– the market is going through the normal gyrations of cost cutting and consolidation in response to challenging market conditions. There has been talk in the market about the manufacturers raising prices a second time, but we don’t see it. The current price increase is built on shaky ground and will remain so, until capacity is aligned with market demand. The manufacturers will have a good idea what to expect from Q4 over the next month, and that will play a role in the direction of pricing. Look to see Seagate be more liberal with their pricing than Western Digital, as their needs are much more immediate.