Market Watch

Hard Disk Drive Manufacturers to Enjoy Holiday Boon

Shipments and revenue in Q4 will post a second consecutive period of gains

November 25, 2010

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Manufacturers of Hard Disk Drives (HDD) are expected to receive a late-year boost from holiday orders as shipments rally during the fourth quarter, according to market research firm iSuppli Corp.

The rise in fourth-quarter HDD shipments will mark the second consecutive period of growth after a fall at the end of the second quarter. HDD shipments will hit 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 is projected to climb 2.1 percent, equating to $8.9 billion for the fourth quarter.

The fourth-quarter uptick in shipments and revenue reflect positive developments on a several fronts, including the anticipated stabilizing of prices, strong demand from the enterprise segment and a return to normal inventory levels, iSuppli research shows.

All told, the expected growth for the final quarter represents a smaller increase than the previous period, when shipments in the third quarter climbed 3.4 percent and revenue rose 3.1 percent. Nonetheless, the performance of the second half of 2010 represents a major improvement from the first half, when shipments in the second quarter declined 3.0 percent and revenue fell 7.7 percent from the first quarter.

Hard Disk Drive Forecast

With their place still secure in the industry despite the small advances being made by the rival Solid State Drive (SSD) technology, hard disk drives 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.

Players Experience Ups and Downs, but Rankings Hold
Among the HDD suppliers, the rankings remain unchanged with Western Digital Corp. preserving its first-place hold on 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 finally reaping the benefits of its lean operating model, and the company will continue to try fending off previous shipments leader Seagate Technology, 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, selling product in the consumer segment at high volume but lower prices, remains at No. 2 with revenue of $2.40 billion, up a scant 0.2 percent from $2.39 billion.

Both companies 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. For Western Digital, the company 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 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.

Read More > Hard Disk Drive Manufacturers Receive Late Boost from Holiday Orders

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