HDD Shipments Decline 5% to 552 Million Units From 2012 to 2013 – Trendfocus

This is a report published this month from analysts of Trendfocus, Inc. in its SDAS: HDD Information Service, CQ4 ’13 Quarterly Update.

CQ4 HDD Shipments Rise to 142.51 Million Driven by Healthy CE and Branded Sales

• CQ1 sales projected to be down seasonally
• 2013 total falls nearly 5% Y-Y to 551.96 million

Notes: Nearline HDDs are included in the enterprise segment. Adjustments to shipments and market shares in this document may be made in the final Quarterly Update.

Seagate‘s sales rose in CQ4 to 56.63 million, up from 55.67 million in the prior quarter. The sequential increase was in sync with the industry’s Q-Q growth. Seagate posted slightly higher sales with flat net income and flat ASPs in CQ4 compared to CQ3. Enterprise HDD shipments eased for a second consecutive quarter, dipping to 7.76 million. Within this segment, performance enterprise units were virtually flat at 3.90 million while capacity optimized HDDs fell to 3.86 million. HDD average capacity for the quarter rose 5% to 922GB and lifted Seagate’s EB shipments by 7% in CQ4.

Toshiba shipped nearly 1 million more HDDs in CQ4, as the company’s shipments grew 16% Q/Q to 22.80 million. All segments posted higher numbers in CQ4 except mobile HDDs, which declined 4% from last quarter. Ironically, it was Toshiba’s desktop segment, which it acquired from HGST less than two years ago, that posted the largest sequential growth. Unit shipments jumped up nearly 1 million units to 4.70 million in CQ4. Enterprise and CE posted respectable numbers of 1.44 million and 2.84 million units, respectively. Toshiba even managed to ship 0.23 million 1.8″ CE HDDs in CQ4, as this form factor refuses to go away.

WDC‘s combined performance of its WD and HGST divisions posted the smallest sequential unit shipment growth of the three HDD companies, and unit shipments grew by 1% to 63.08 million. However, the company improved ASPs by $2 to $60 while maintaining flat gross margins and modestly lower net income. WDC’s desktop business was the only one to post lower CQ4 numbers, as sales fell by 1% to 17.98 million. Of the other three applications, CE posted the largest Q/Q growth of 3.7%.

HDD Applications Matrix, CQ4 ’13

• Total HDD EBs continue to grow
• Up nearly 10% Q-Q to 124.40EBs

Mobile HDDs: Sluggish holiday notebook PC sales kept mobile HDD demand in check. Unit shipments increased only modestly in CQ4 to 63.88 million, up only 0.28 million from the prior quarter. Despite flattish sales, there is still hope that the expiring Windows XP support in early 2014 will result in some resurgence in notebook PC sales, which in turn should bolster mobile HDD demand. On a slightly more positive note, the main GB/disk remained unchanged at 500GB/disk, while both EBs and average capacity rose 8% sequentially to 42.93EBs and 672GB, respectively.

Desktop HDDs: Desktop HDDs sales grew to 43.36 million as end-of the-year corporate budget flushes supported desktop PC purchases and, therefore, HDD demand. Average capacty posted a solid Q-Q increase of 9.5% to 983GB. This boosted the EB total to 42.64EBs reflecting an impressive sequential increase of nearly 13%. Declining ASPs neutralized the higher unit shipments keeping revenues relatively flat from quarter-to-quarter.

Enterprise HDDs: Enterprise shipments declined for a second consecutive quarter, but the unit falloff was modest. This market is heavily affected by enterprise facility deployment schedules, and it is not a surprise to see small consecutive increases or decreases in unit shipments. Traditional enterprise shipments were flat Q/Q at 8.27 million so, therefore, entire shortfall was from a dip in nearline HDD – sales of these capacity enterprise HDDs decreased 0.19 million units from CQ3 to CQ4. On a positive note, both traditional and nearline average capacity grew and ended the quarter at 516GB and 2.32TB, respectively. For the quarter, total EBs for enterprise (traditional and nearline) totaled 24.46EBs, down slightly Q/Q due to the lower nearline HDD numbers.

Consumer Electronics (CE) HDDs: Demand for 3.5″ CE, mainly utilized in xVRs and surveillance, was robust in CQ4, and unit shipments were up almost 1 million from CQ3 to 9.85 million. Average capacity increased, driving up EB shipments to 10.65EBs for the quarter. 2.5″ CE HDD sales rose modestly after CQ3’s big jump – which was driven by pre-launch builds of the new Sony PlayStation 4 and Microsoft Xbox One game consoles – and unit sales grew marginally to 8.22 million. Both new gaming systems began sales in CQ4 and utilize a single-platter, 500GB 2.5″ HDD. 1.8″ CE HDD shipments reached 0.23 million in CQ4, as Apple’s iPod Classic, the primary consumer of the 1.8″ CE HDDs, continued to sell to a small niche of audiophile consumers.

2013 HDD Industry Summary: HDD Sales Impacted by Soft PC Sales

• Unit shipments decline 5% Y/Y to 551.96 Million
• Total EBs shipped rose 16.0% to 458.26
• Tempered outlook for 2014

Mobile HDDs: 251.56 million units shipped in 2013, down 7.2% Y/Y. Notebook PC sales disappointed, as ultrabooks failed to revitalize interest in notebook PCs. Western Digital, including HGST, maintained its lead in this space with 45% market share. Seagate, including Samsung, was second supplier in this market with 33%, and Toshiba represented the balance with 22% share. Average capacity for the year was 636GB, up 16.3%, while EBs shipped lifted 8.1% to 159.98.

Desktop HDDs: 168.67 million units shipped, down 5% Y/Y. Desktop PC sales have been declining for a few years, but remain on a modest downward slope. As a result, desktop HDD sales have exceeded most expectations and continue to post respectable numbers. Going forward, desktop PC and HDD figures will be lower, but should remain substantial for years to come. Seagate led all companies in this market with 49% market share followed by Western Digital at 43%. Toshiba made measurable gains in 2013, as the company shipped nearly 14 million desktop HDDs for 8% share. 2013 average capacity for this segment rose by 13.8% to 938GB, while EBs totaled 158.26, up 8.5%.

Consumer HDDs: 64.42 million HDDs shipped to CE applications in 2013, down 4% Y/Y. Unit shipments of all three form factors declined in 2013, as HDD usage in CE applications have not expanded beyond game consoles, DVRs, and a couple of other minor market opportunities. The 3.5″ CE HDD market is the largest market at 36.48 million followed by 2.5″ CE HDDs at 27.27 million. However, in the long run, the smaller 2.5″ form factor will be favored for its smaller footprint and power consumption, resulting in a steady decline in 3.5″ CE HDD sales. In 2013, Western Digital, including HGST, led the CE market with 47% share, followed by Seagate at 39%, and Toshiba at 14%. A sharp increase in capacity mix drove CE HDD average capacities up by 41.6% to 716GB. As a result, EBs shipped rose an impressive 35.4% to 46.14.

Enterprise HDDs: 67.31 million units were shipped in 2013, up from 63.63 million in 2012. Traditional enterprise shipments slipped in 2013 to 32.00 million, down from 33.07 in 2012, while nearline HDD sales grew over 15% to 35.31 million. Seagate’s lead in this space has not diminished, as the company maintained the same 47% market share from 2012. Western Digital/HGST was close behind Seagate at just over 45% and Toshiba came in at just under 8%. Average capacities for enterprise HDDs, including traditional and nearline models rose 32.1% Y/Y to 1,395GB. 93.88EBs shipped, up 39.7%, which matches Trenfocus’ EB model established at the start of 2013.