WW HDD Shipped Dropped 7% in 2012 – Trendfocus

Trendfocus, Inc. has just published its CQ4 ’12 Quarterly Update and Long-Term Forecast.

CQ4 HDD Sales Decline to 135.83 Million;
2012 Total Falls 7% to 579.47 Million
Economic improvements will fuel
modest PC growth in long-term

                                 WW HDD Market
                                (in million of units)

HDD Market Summary, CQ4 ’12
2012 ended on a down note as CQ4 unit shipments fell 2% sequentially to 135.83 million. Continued weak macro-economic conditions paired with year-end OEM inventory adjustments tempered HDD sales. For the second consecutive year, annual unit shipments also declined as 2012’s shipments dropped 7%, to 579.47 million.

Although there were other factors that contributed to 2012’s disappointing results, the most significant were as mentioned before, weak macro-economics, year-end OEM inventory adjustments, and shifting consumer spending patterns toward tablets. GDP (Gross Domestic Product) for the Advanced Economies fell short of early year expectations and rose only an estimated 1.4% in 2012. Consumer spending and confidence was weak, and sales of higher priced items such as personal computers suffered. Brighter news is on the horizon, as GDP is expected to improve to more healthy levels over the next five years. PC companies curbed HDD purchases in the second half of the year in order to minimize inventories exiting 2012 – providing another factor driving the annual HDD shipment decline.

In the client space, notebook PC sales were soft throughout the year, and even the launch of Microsoft’s Windows 8 did not reignite notebook PC sales. As a result, CQ4 mobile HDD volumes were down 9% sequentially, to 62.63 million and 2012 totals were down to 271.18 million. Desktop HDD sales surged in CQ4 to 44.56 million, and helped to offset some of the mobile weakness; however, due to the poor start, total desktop shipments for the year were off nearly 23%, to 175.22 million.

Note: Nearline units, formerly included in the desktop segment, are counted in the enterprise sector (as of CQ1 ’12), thus adding nearline HDD figures with desktop HDD numbers, the year-to-year decline was only 10%.

Lower consumer spending generally equates to fewer CE devices sold as well, and as a result, consumer electronics HDD unit sales were off in CQ4 by 16%, to 14.00 million. For the year CE HDD units were off more than 15%, to 69.82 million, down from 82.27 million in the prior year.

The enterprise HDD market has been the most consistent through the years, and 2012 was no exception. Traditional enterprise HDD (mission critical, or performance enterprise) shipments were almost identical to last year at 33.07 million, compared to 33.02 million in 2011. 2012 Nearline (business critical, or capacity enterprise) HDD shipments equaled 30.56 million versus 23.35 million in the prior year. Combined, this year’s enterprise HDD sales grew 13% Y/Y, which is one sign of just how fast digital content generation is driving the need for increased enterprise/cloud storage.

Despite the softer market conditions, negotiation power does not completely favor HDD buyers. On average, HDD prices declined approximately 3-4% sequentially, which is less than HDD customers’ targets. Mature/lower-capacity HDD prices stayed flat or declined marginally while newer/higher-capacity HDD prices declined faster.

Outlook:
For the four-quarter outlook, market conditions should remain relatively unchanged, and overall PC and HDD markets will stayed subdued. As a result, client HDD, desktop and mobile, shipments are projected to decline 4.3%, to 427 million. CE HDD market will not fare any better, as sales are expected to decline in 2013, to 69.70 million. The enterprise segment is the only market forecasted to grow in 2013. Nearline HDD shipments will top 37 million, reflecting 22.3% growth Y/Y. Traditional enterprise HDD sales will remain nearly flat, posting a modest decline of 2% in 2013 to 31.70 million.

The long-term forecast is based on many factors such as GDP growth, tablet displacement, PC upgrades, corporate spending, and digital content growth.

HDD Market, Long-Term Forecast
Five Year Forecast Assumptions:

HDD WW Market Forecast
    
(in million of units)

* actual

• Desktop PC segment will maintain a slow downward trend for the next five years, although ‘All-in-one’ desktops will
• help to offset some of the declining desktop PC volumes.
• External HDD sales will bolster desktop HDD volumes through 2017, providing the basis of the personal cloud or home-based digital content hub.
• Thin and light notebooks will become the standard within the next couple years, driving the transition to 7mm and possibly 5mm thickness 2.5" disk drives.
• The SSD market is expected to become sizeable in the commercial space by 2014. The consumer segment will take longer to shift to SSDs due to cost/capacity metrics that favor HDDs
• Increasing sales of tablets and smart phones will temper traditional notebook PC sales through the forecast. 2.5" external HDDs will account for an increasingly large percentage of mobile HDD sales through the five-year period.
• Nearline/capacity enterprise HDD market will grow solidly for the next five years, as digital content growth fuels the need for increasing exabytes of enterprise storage. By 2017, over two-thirds of all enterprise HDDs sold will be this classification.
• 6 and 7-disk nearline HDDs will become increasing popular within 2-3 years, as HDD companies compensate for the stalling areal density curve by adding more components to each drive. xVRs will be the driving force for the CE market – slowly transitioning to 2.5" form factor through the forecast period.
• Next generation game consoles (Xbox and PlayStation) will employ HDDs – combining with xVR growth to bolster 2.5" CE HDD volumes starting late 2013.