HDD Shipments To Fall Just Short of 120 Million Units in 3Q15 – Trendfocus

In an executive brief, part of Trendfocus, Inc.‘s Information Services, you can read:

View from Korea and Japan … CQ3 HDD Shipments Will Be Up, CQ4 Looking Good Too
 
In August, Trendfocus published outlook for CQ3 and CQ4 ’15. Premise was that PCs and HDDs were misaligned relative to 1H15 shipment volumes, and a correction to that combined with mild seasonality would push sequential volumes up over 120 million HDDs per quarter. Key to this was timing – and we called for a stronger jump in CQ3 volumes and a much smaller increase for CQ4.

At this juncture it appears our timing was about 30-45 days early.

Few points for your consideration:

• 2H15 PC demand is rebounding; timing is sliding toward CQ4: rebalancing thesis favored a stronger move in CQ3, but it now appears the peak demand will be in the late-September to early November timeframe. The Win10 schedule is a leading factor in this, with the new OS now starting to dominate in-store system populations. Additionally, PC OEMs and ODMs have chosen a conservative path for this half-year, so the typical uplift seen in August and September is muted. During the July launch of Microsoft’s latest OS, the company and its PC OEM partners clearly stated that the roll-out of new models would ramp through October, essentially pushing out demand until late CQ3 and into CQ4.
• CQ3 HDD shipments should be in the 115-119 million range: Trendfocus’ assumption of rebalancing of HDD supply vis-à-vis PC shipments called for CQ3 to be greater than 120 million. While the quarter will be up in unit shipments, it appears that July and August were slightly weaker than expectations. Consequently, with two weeks left in the quarter Trendfocus believes shipments will fall just short of 120 million units, or about 2% to 3% below forecast.
• Nearline demand underperforming: Various data points from 1H15 suggested a modest improvement rise in nearline drive shipments in 2H15, but once again, it appears that any increase will not come until CQ4 as large hyperscale demand for nearline remains muted. Current signs point to modest improvements for the final quarter of the year.
• CQ4 indicators positive: “Chasing the upside” will be the mantra in CQ4, and indications are that system builds will accelerate mildly through October and into November. If seasonal demand accelerates to drain supply at retailers, PC OEMs will respond with replenishment builds that will be air-shipped to meet upsides.
• Economic headwinds from slower growth in China to weakening across Europe exacerbates the weak demand for PCs. While difficult to quantify, likely a large chunk of the forecasted -10% fall in PC shipments for 2015 may be due to weak consumer confidence resulting from worsening economic conditions in several geographies.

Improvements in HDD shipments through the second half of the year will be modest, but discipline displayed by the HDD manufacturers as well as customers will drive increases based on real demand and hopefully blunt the fear of inventory build-ups that would destabilize HDD TAM projections into 2016.