HDD High Prices and Short Supplies Lingering
Although HDD supplies in the first quarter commenced their recovery from the
disastrous floods that struck Thailand in late 2011, a full recovery of
production is still months away, with unit shipments not expected to return to
annual growth until the third quarter, according to IHS iSuppli Memory & Storage
research from information and analysis provider IHS.
Quarterly WW HDD Unit Shipment Forecast
of Units Shipped
|Annual % Change
Due to production disruptions at HDD suppliers and at component makers,
global hard drive shipments in the fourth quarter of 2011 fell by 26
percent compared to the same period in 2010. Shipments are set to decline by
another 13 percent in the first quarter and by 5 percent in the second quarter
on an annual basis.
The global HDD market won't return to
year-over-year growth until the third quarter, when shipments rise by 2 percent,
followed by a 49 percent surge in the fourth quarter as the industry snaps back
from the previous shortage.
On a sequential basis, shipments in
the first quarter are expected to increase by 13 percent, a dramatic turnaround
from a 29 percent plunge in the fourth quarter of 2011. Shipments are expected
to continue to grow by 14 percent sequentially in the second quarter, by 11
percent in the third quarter and by 4 percent in the fourth quarter.
The recovery of global HDD manufacturing has begun and will continue
during each quarter of 2012, However,
the recovery will be prolonged for at least two more quarters, as supply
constraints keep unit shipments from climbing on an annual basis until third
quarter. Meanwhile, HDD prices will remain inflated and inventories will
continue to be depleted, showing that demand is exceeding supply. Supply and
demand should return to balance by the end of the third quarter.
HDD production spins up
Major HDD suppliers have
shifted some production to locations outside of Thailand, which has helped ease
the shortage situation. At the same time, some of the major HDD component
suppliers have resumed a portion of their production in the country and have
migrated manufacturing operations to other regions.
Corp., the HDD manufacturer most impacted by the floods, has increased
manufacturing in other countries, and is expected to return to full production
by September. Toshiba Corp., which also was hit hard by the disaster, has
boosted its production in other countries as well.
drop, prices rise
However, given the magnitude of the disaster,
these moves have been insufficient to make up for the shortfall in production so
far. This will result in a plunge in global HDD inventory in the first quarter.
In anticipation of supply constraints, the global average selling
price (ASP) for HDDs soared by 28 percent in the fourth quarter. While prices
will decline by 3 percent in the first quarter and by 9 percent in the second
quarter, they will remain inflated above 2011 levels throughout 2012.
Prices will remain high for a number of reasons, including the higher
costs associated with the relocation of production, as well as higher component
costs because of flooding impacts among component makers, Furthermore,
PC brands have signed annual contacts with HDD makers that have locked
them into elevated pricing deals for the rest of the year."
given the two megamergers between Seagate/Samsung and
WDC/Hitachi GST, IHS expects the HDD industry could hold prices higher than
pre-flood levels for a few more quarters because there are fewer competitors in