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iSuppli optimistic on HDD market growth in 2H

Posted: 13 Nov 2007 ?? ?Print Version ?Bookmark and Share

Keywords:HDD market? hard disk drive? STB?

The HDD market is expressing renewed optimism that business conditions have turned for the better in the second half and will continue to improve into 2008. Market research firm iSuppli Corp. forecast that global HDD shipments will hit 132.5 million units in Q3, up 15 percent from 115.3 million in Q2.

In the first half, HDD prices dropped 20 percent q-o-q for select equivalent-capacity notebook HDDs, declining from slightly above $100 in December 2006 to about $65 in early June. Explained iSuppli, the deep price cuts inflicted pain upon suppliers that they decided to back off from the mad rush to gain market share.

"Market share alone does not fill the coffers," said Krishna Chander, senior analyst for storage systems at iSuppli. "Higher profits come from identifying and positioning product lines to address emerging trends, rather than battling it out over established commodities that have little differentiation. These higher profits drive investments in future technologies, keeping suppliers competitive."

According to iSuppli, prices for equivalent-capacity HDDs will decline marginally by 4-6 percent in Q4.

Stable demand
HDD shipments will grow along with rising PC sales in the seasonally strong second half, noted iSuppli in its report "A Sweet September: Storage on the Rebound". Shipments of PC units will rise by 9.8 percent in Q3 and by 12.4 percent in Q4. Meanwhile, HDD shipments will grow by 15 percent in Q3 and 11.3 percent in Q4.

According to iSuppli, STB/DVR systems will generate strong HDD demand in the second half of the year. Sales in this segment are expected to rise to 22.7 million in the second half of the year, up 22 percent from 18.6 million in the first half.

Hard times over for hard drives
In another sign that the HDD market is rebounding, both Seagate Technology LLC and Western Digital Corp. provided optimistic outlooks half way through Q3. In mid-October, Seagate validated this outlook with positive Q3 results. Early this month, Western Digital reported HDD revenues of $1.7 billion, up 26 percent from the previous quarter.

Seagate's financials indicate it rebounded smartly from its nadir in Q1. The company's gross margin rose 24.6 percent in Q3, up from 21.3 percent in Q1, said iSuppli. Seagate's margin will rise by another 1 percent in Q4, noted the market research firm. Similarly, its revenue rose to $3.3 billion in Q3, up from $2.8 billion in Q1. The company expects $3.5 billion in revenue in Q4. Western Digital increased its gross margin from 15 percent in Q2 to 18.4 percent in Q3.

Likewise, Hitachi Ltd reported that it had narrowed its losses in Q4 and is eyeing a small operating profit for its HDD operations. The three companies mentioned they either sustained or improved their ASPs per HDD unit compared to the previous quarter.

iSuppli's unit shipment and q-on-q growth rate estimates for HDDs.

The HDD rebound bodes well for storage products across a broad spectrum of technologies, including flash, optical, tape and finished systems. The strong demand shows applications are continuing to generate more data and content that must be stored in different formats and media.

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