Can SMR and Dual Storage/SSHD Slow Declining Trend? – Trendfocus

This article is an executive brief of Trendfocus, Inc.‘s Information Services.
 
Trendfocus was recently traveling in Asia and many topics have emerged:

CQ4 HDD Shipment Update: Trendfocus’ forecast for CQ4 ’15 HDD shipments is 120 million, based on assumptions of lower gaming HDD sales, very mild PC seasonality and slight improvements in the enterprise.

With three weeks left in the quarter – a great deal of time in HDD Land – here’s an update on those assumptions …

Client seasonality reasonable: Client HDD demand is tracking with expectations, although the ‘hoped for’ upside has not materialized. ODM results for November surprised on the positive side, so we still hold out hope for strong, late-quarter HDD orders.

Enterprise mixed: As of early December, performance enterprise (10,000/15,000rpm, or ‘mission critical’) was underperforming slightly. Typically, there is yearend buying of performance enterprise drives, and this is not happening. We assume that at least some of this underperformance is owing to greater SSD adoption at the expense of 15,000rpm drives. Nearline (business critical or capacity enterprise) is tracking relatively flat, so the net is enterprise drive shipments may not see the expected CQ4 bump.

HDD production reflects effort to work down finished goods inventories: We see combined HDD production to be about 114 million-115 million, a few percentage points less than our shipment forecast of approximately 120 million. If this goes as planned, finished inventory levels will be reduced entering 2016.

‘Dual-drive’ still alive? While not completely underpinned, there was some chatter that the dual-drive configuration in notebook PCs may return. The SSD in this case would not be a low capacity caching drive, but rather a 128GB device for boot and application storage, combined with an HDD for capacity. Another development is the push by Intel for PC vendors to adopt a configuration of lower DRAM combined with its new Optane (3D Xpoint) non-volatile storage in conjunction with an HDD. Targeting high performance and high capacity, Intel believes that its optimization of the three memory and storage types can offer a solution that would be cheaper than a higher DRAM/SSD-only configuration. While Intel offers the chipset support for Optane, it is unclear whether PC OEMs would be excited at the prospect of becoming even more reliant on the chip making giant.

SMR impact shifting? SMR has been touted as a capacity booster for both enterprise and mobile HDDs. Several months ago the conventional wisdom was the SMR would make a splash first in enterprise, but this is appears to be changing. In enterprise applications, SMR management requires some non-trivial host-side optimization along with the development of host-aware SMR drive standards. We do see SMR drives turning up in volume in 1H ’16 when 1TB/disk mobile drives begin shipping in volume. Seagate is leading the charge here, and early indications are that the fears of measurable performance degradation are not materializing. We are following this closely and will report in the coming months.

Huawei entering the PC segment? Reports that Huawei has filed trademarks in China have not been fully underpinned. But the possibility is intriguing. First, Huawei is an extremely aggressive company, which might lead to more turbulence in a still-crowded and declining market. Second, the company makes its own PCIe SSDs for enterprise and it would be interesting to see if that experience can be migrated to the PC platform.

NAND $/GB trend lines continue to dip: Trendfocus refreshed forecasts of $/GB for a variety of SSD types back in August of 2015. Since then, competitive pressures have bent the trend lines down further. A result of this price erosion is the acceleration of SSD attach rates especially in commercial notebooks. With weak ongoing mainstream consumer notebook PC demand (most which are HDD based), it appears that PC OEMs are chasing the more lucrative high-end of the market. While representing only a small fraction of the total market, the high-end may be one of the relatively healthier segments, and a move towards SSDs in the higher price bands of the PC market is providing upward pressure on SSD attach rates.