The Storage Market is Tipping into Allocation
Historically, the 3rd quarter and the beginning of the 4th are typically the strongest quarters for the storage market. Seagate confirmed the statement above with its recent earning projections, which indicated improving market conditions. Indicative of a tightening market, Seagate and Western Digital are going on allocation with their desktop lines, causing a stir in the market. The manufacturers are having a hard time keeping up with demand on IDE, which could potentially lead to spot shortages.
Desktop
The desktop market has showed continued strength over the past few months. With the approaching holiday build schedule and more and more consumer electronic manufacturers using IDE drives in their applications, drive manufacturers are having a hard time keeping pace with demand. Both Western Digital and Seagate are having allocation issues on the 250GB capacities and higher. We are seeing the open market supply tighten for the 250GB, 320GB, and 500GB capacities. Western Digital recently announced a price increase on the 250GB and larger capacities and rumor has it that they are applying these price increases to existing orders that have not yet shipped. The combination of tight supply, increased demand, and higher prices will create a difficult environment for OEMs.
SATA technology has become the dominant standard in the desktop market. Horizon is seeing most of the new build demand geared towards SATA technology. The refurbished demand continues to be for PATA technology driven by the service market.
Mobile
The mobile market along with the desktop market has been showing continued strength over the past few months. Demand in the notebook market has put a strain across all products in the notebook supply chain. This has caused mobile hard drive pricing to increase by 10% or more across all capacities. The recent earthquake in Japan has curtailed supply of Fujitsu notebook drives. Fujitsu, who is considered one of the top three manufacturers of mobile drives, has started to de-commit on existing orders. This has caused a rippling effect with the other manufacturers. A few months ago there was excess inventory on lower capacities of 40GB and 80GB capacities. However, in the last month inventory has dried up, resulting in price increases of approximately 20%. SATA is starting to become the dominant technology in new build drives with most notebooks now shipping exclusively with SATA’s due to the performance edge over PATA and the cost of SATA having reached parity with PATA technology. Still the refurbished and service markets continue to trail with PATA playing the dominant role.
Over the next few months expect to see 40-120GB PATA become very scarce in the market while the new higher capacities 160GB and larger dominate the channel.
Enterprise
SCSI continues to be the slow mover in the storage market as evidenced by Seagate recently releasing a tremendous amount of SCSI and FC product into the channel at discounted prices. With the glut of inventory in the broker market and the distributor channel stuffed with product it is a buyers market. Pricing is negotiable and in most cases very favorable to move inventory. The only allocation issues we are seeing are for 68pin product. There is limited product availability, and what product is available is selling at a premium.
Horizon doesn’t see this market changing until maybe the 1st or 2nd quarter in 2008. Once most of the product goes EOL, and the OEM’s still need to service their contracts, we will then see an increase in demand.
Home > Storage Market Perspective
Storage Market Perspective 9/6/2007
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