Seagate Technology recaptured the lead in hard disk drive (HDD) shipments during the fourth quarter of 2011, ousting Western Digital Corp. after seven quarters at the top, following heavy losses by the former market leader in the devastating Thailand ﬂoods last year, according to an IHS iSuppli Storage Space brief from information and analysis provider IHS.
Seagate shipped 46.9 million HDD units in the ﬁnal quarter of 2011, compared to 28.5 million units for archrival Western Digital. Seagate, which had trailed Western Digital in total HDD shipments since the ﬁrst quarter of 2010, suffered a relatively minimal sequential loss of 8 percent compared to third-quarter ﬁgures of 50.8 million units. Western Digital, in contrast, took a massive blow as shipments fell 51 percent from 57.8 million units in the earlier quarter.
This reversal catapulted Seagate back to the top of the HDD market—a distinction it hasn’t claimed in at least two years. Offering higher-margin product, Seagate also continues its longstanding perch as revenue leader, a lock on the space that Western Digital has not been able to pry free.
All told, HDD shipments from the industry’s ﬁve major manufacturers retreated sharply in the fourth quarter to 123.3 million units, down 30 percent from 175.2 million units the quarter before. Along with Seagate and Western Digital, major players such as Toshiba, Hitachi Global Storage Technologies and Samsung Electronics also posted shipment declines.
The new rankings mean that Seagate in the fourth quarter controlled 38 percent of the HDD shipments market, with Western Digital coming in a distant second at 23 percent. Toshiba had 16 percent, followed by Hitachi GST with 14 percent and Samsung with 9 percent.
Seagate owes its latest victory to a fortuitous accident in geography: its HDD manufacturing plant in Thailand is located on high ground. As a result, the company was less impacted by the October ﬂoods— the most destructive in the last 50 years for the Southeast Asian country. On the other hand, Western Digital’s HDD manufacturing facilities were engulfed by rampaging storm waters, which effectively slashed its fourth-quarter output to half of the manufacturer’s preﬂ ood volume.
Moving forward, the two titans will continue to battle for the No. 1 spot. Both companies also are in the process of ﬁ nalizing mergers—Seagate with Samsung, and Western Digital with Hitachi GST—which would have the general effect of intensifying rivalry between the two in the face of reduced overall competition.
Gross Margins and ASPs are Up; Pricing Could Remain Elevated
Despite the massive impact of the ﬂoods on the hard disk drive industry, both Seagate and Western Digital saw gross margins rise to record highs in the fourth quarter, due to price increases across the board in the wake of HDD shortages.
Seagate, which had a long-term goal to reach gross margins in the 22 to 26 percent range, actually enjoyed a 32 percent climb in the fourth quarter, thanks to higher average selling prices (ASP). Seagate’s ASP surged from $55 in the third quarter to $68 in the fourth—a strong 24 percent upswing.
Western Digital also attained a company record with gross margins at 32.5 percent during the same period, after its ASP shot up to $69 from $46. Given the expected HDD shortages for the ﬁrst half of this year and beleaguered Western Digital’s long road to recovery, Seagate’s gross margin is expected to remain at the 30 percent level throughout 2012.
In general, however, pricing will start to decline at the end of the ﬁrst quarter this year for some hard disk drive products, with component shortages ﬁnally easing and production increases kicking in from plants that had escaped ﬂ ooding.
Even so, pricing is not expected to return to preﬂood levels anytime soon, especially because there will be fewer manufacturers left after both Seagate and Western Digital complete their individual buyouts of Samsung and Hitachi, respectively. Also, higher pricing can be expected with the relocation of HDD production following the ﬂood, increased component costs from manufacturers impacted by the disaster, and lofty costs in general associated with the continuing development of high-technology drives.
One other factor could impact market values for the rest of the year. If the new, super-thin Ultra-books from Intel Corp. take off—and there is every indication they will—HDD prices could remain elevated throughout 2012, IHS believes.
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