$1 Billion in Capital Spending for HDD Facilities Damaged in Thailand Floods

The 2012 Hard Disk Drive Capital Equipment and Technology Report ($7,000) provides 207 pages of analysis of technology developments and capital equipment spending to sustain the growth and development of the hard disk drive industry.

25 tables and 121 figures give analysis and projections out to 2016. This is the 15th report produced by Coughlin Associates (and before that by Peripheral Research) on this subject.

Highlights from the report:

• We assume 169% growth in HDD capital spending from 2011 to 2016 driven by three factors:  unit shipment increases of 167%, the introduction of new HDD technologies such as HAMR and the replacement and repair of equipment damaged in the 2011 Thailand floods.
• Between CQ4 2011 and CQ4 2012 over $1 B in capital spending is expected to repair or replace equipment and facilities damaged in the Thailand floods.
• HDD and component companies have more cash to invest in equipment and technology development in 2012 and 2013, due to higher drive demand, limited drive supply and higher HDD prices.
• Total industry spending on capital equipment in 2012 is expected to be about $2.4 B with 72% of this spent on process equipment, 21% on production test and 7% on metrology.
• Average HDD capital equipment spending per year between 2008 and 2016 is estimated at about 7.2% of HDD industry revenue, with this percentage increasing in the last years of this period with due to new technology introductions.
• HDD areal density has slowed to 20-25% annually but 3.5-inch HDDs with storage capacities of 12 TB and 2.5-inch HDDs with 6 TB are expected by 2016.
• Lower areal density growth will drive more components per drive and thus more capital spending on head and media production equipment in coming years.
• Industry consolidation and recovery from the Thailand shortages will result in higher HDD prices than 2011 at least until 2014 and likely HDD prices will flatten out about 10-15% higher than in 2011 – this will help fund expensive new technology transitions by 2015-2016 and increase areal density growth rates to 40+% CAGR.
• The normal capital equipment cycle will likely be re-established by 2014. Capital purchases in 2014 and later will be driven by increasing unit demand (assumed 14% annual growth) as well as the introduction of heat assisted magnetic recording in 2015 and 2016.
• A technology called shingle write recording may provide some additional capacity areal density growth (up to 50%) in the 2012-2014 period but this will likely cause little growth in capital equipment and may not be appropriate for all HDD markets.
• There will be a transition to heat assisted recording starting slowly in about 2015 and 2016 requiring new types of capital equipment and changes in manufacturing processes.
• Testing and metrology equipment growth will lag production process spending as drive companies try to reduce the testing costs of HDDs and components.
• Form factors ratio changes: 2.5-inch HDDs are now dominant and 1.8-inch HDDs appear to be approaching end of life.
• Lower flying heights and head and disk changes lead to increasing metrology requirements requiring new measurement technologies as well as tightening of head and disk specifications.