Hard Times for Hard Drives

According to Coughlin Associates, the hard disk drive (HDD) industry experienced a lower growth in the year 2013. Worldwide revenues for HDD shipments were expected to reach $33bn in 2013. This figure is down by 12% from $37.8bn in 2012. This corresponds to a 2013 unit shipment forecast of 552mn units compared with 577mn in 2012 and 624mn in 2011.

The analyst firm opiates that the continuing decline in HDD unit shipments in 2013 is believed to be due to longer refresh cycles for PCs, consumer preference to purchase tablet computers rather than traditional PCs and the lack of popularity of Windows 8 PCs. The above rings true even for Indian market when it comes to consumer HDDs. Sunil Khetan, deputy general manager (DGM), Neoteric Infomatique, says, "More than 30% HDD market in India has contracted. In terms of value, due to the growth in other segments, the units have contracted but not the values."

Moving our attention towards the key industry players in hard drive market let's have a look at the market performance of Seagate and Western Digital in 2013. Western Digital Corp. managed to outsell its competitor Seagate Technology by over six million hard disk drive units in the second quarter of 2013, as the total available market of HDDs contracted by 2%-3% in the last year. This year the dipping market of personal computers remarkably affected the markets of PC components. Consequently the shipments of hard disk drives also lowered at Seagate, Toshiba and Western Digital.

During the second quarter of 2013, Seagate sold around 53.8mn of hard drives in total, according to the company's financial reports. Seagate's unit shipment declined by 1.9mn. Western Digital managed to sell 59.90mn hard drives in Q4 FY2013, or about 280 thousand lower than in the previous quarter. Average capacity of a WD HDDD was 797 GB, based on the company's financial report. Toshiba Corp. most likely shipped around 1.9mn hard disk drives during the quarter, which is around one million units lower than in Q1 2013.

This being the worldwide market figure of hard disk drives, Indian channel partners which comprises tier 2 resellers have the same facts to present when asked about their business in HDD. Krishna, CEO, Sri Lakhsmi System Products, says, "We are experiencing a dip in hard drive market demand since last year. If I sold 3000 HDDs quarterly in 2012 then last year the figure came down to 1000 HDDs. Also, price being one of the factor here." Krishna points out the price factor which is driving the HDD market. For a certain 500GB HDD he sells it to the dealer for `3,250, the market price of that particular HDD will be more than `30-35. As a result the price of the HDD in a typical offline store is sold at `3,280-3,285. But to the much disappointment of the resellers a 500GB HDD is sold at `2,950 on online shopping sites. "HDD is definitely witnessing a slow growth and that little growth is being eaten up by e-commerce. Hence, resellers or offline stores are facing no growth in HDD business", explains S. Karthikeyan of Bloom Electronics. His HDD selling units have slumped by 40% in Fy13.

So how are vendor see companies making up for the slow growth in HDD market? "It is true that TAM (Total Available Market) has declined significantly. Nevertheless, with increased demands in the AV, Enterprise, Storage, Multimedia and Entertainment segments and Western Digital equally focusing on the same, sizeable business is still expected this financial year", says, Sunil Khetan.

Enterprise storage will definitely continue to accelerate HDD market. According to Coughlin Associates, shipments of HDD for enterprise applications, particularly the large HDDs used for content storage in large datacenters ( the cloud), was robust in 2013. It also forecasts that a new generation of ultra-thin notebook PCs using hybrid HDDs could help with the recovery of PC HDDs in the upcoming days. With Desktop HDDs showing continuing decline, the fate of HDDs lies with cloud storage, and ultra-thin notebook computers. The analyst firm estimated that for 2013 Western Digital had 42-45% market share, Seagate had 40-43% and Toshiba had 13-16% market share respectively.

According to Sunil Khetan, "With incremental growth in tablets, we see vendors coming up with HDDs which would be compatible with tablets. Also, they would be focusing on NAS and cloud-based solutions, the demands for which are increasing by the day."