Driven
by sagging demand, over the past month the hard drive market has settled into
conditions more representative of this time of the year. Seagate, the market
leader in storage with the broadest product line, is shrinking their product
offerings, indicative to the growing commoditization of the market and the need
to better manage their portfolio of products. Seagate has announced that by next
year they will no longer be supporting SCSI product and will be moving customers
to the SATA interface. This leads to one question – Will the PATA interface go
by the way side of the SCSI drives?
IDE
Seagate's recent
announcement that it won't be meeting Wall Street’s expectations is indicative
of the market conditions. Seagate identifies demand along with pricing pressures
as the primary culprits. Towards the end of the first quarter, the market saw
both of these issues play themselves out in the open market. In trying to
achieve Wall Street's targeted numbers, they made one-off offers that they
normally wouldn’t make to the open market with very aggressive pricing.
Typically these types of offers would be coming from OEM's looking to clear out
inventory at the end of the first quarter. In this case, we are seeing
authorized distributors moving product at very low costs. We saw one distributor
move in the market on a large qty of 250GB Maxtor drives where the pricing was
in direct competition with their recertified drives. Rumor has it that these
drives have a quality issue with a failure rate of ten percent. As expected
750GB and 500GB pricing has been dropping consistently over the past few weeks
following the typical pattern of newly introduced products, resulting in 10-15%
price reductions in these capacities.
Mobile
The mobile
market continues to have an abundant supply of lower capacities. With 40GB and
60GB drives readily available customers are only buying at perceived below
market prices. Under considerable downward pressure are the 40GB notebook
capacities. The price keeps dropping due to an abundant supply and limited
demand for the drives. Seagate just announced the introduction of a 160GB SATA
7200rpm drive in a 2.5" form factor. This coincides with OEM feedback that there
have been discussions of using mobile drives in desktop and SCSI applications.
With capacities and speeds growing, we will see a migration into these
applications. This was the most evident when SATA made its way into the OEM
notebook channel. Most notebooks are being built with SATA drives today and by
mid year expect to see all notebooks to have SATA drives.
1.8"
drives
These micro drives continue to dominate IPOD’s and MP3
players. While the laptop computer market is always trying to get lighter and
thinner without compromising performance, it looks like this 1.8" form factor is
ready to push laptops further towards its goal. A few of the major notebook
manufacturers are now building with these drives. Toshiba is now shipping a 1.8"
100GB drive which is significant for laptop storage. You will see a continued
transition of laptops shipping with the 1.8" form factor.
Day-to-day
market activity is supporting the transition of using the 1.8” 100GB drives with
the market in excess of 20GB and 30GB capacities. However, there has been an
increase in interest for larger capacity drives such as the 60GB and larger.
SCSI
The SCSI market will be a very interesting one over
the next few quarters. As mentioned above Seagate is discontinuing these drives
and will only be shipping SATA and FC product. However, typical with these types
of announcements, the market has been slow to react. We are still seeing a lot
of excess in the market. However, OEM's are concerned with this news. Many of
existing contracts need support on SCSI for many years to come. This will
require careful planning and contingency plans.
