HDD Market Dips in 4Q12 as PC Demand Falters – IHS iSuppli

The market for HDDs contracted in the final quarter last year after failing to receive a boost in demand from PCs, a traditional source of strength, according to an IHS iSuppli Storage Space brief from information and analytics provider IHS.

HDD shipments fell to 135.8 million units, down 2.4% from 139.2 million units in the third quarter of 2012. Total revenue slipped to $8.4 billion, down 3.4 from $8.7 billion. WD was the top HDD supplier in both shipment and revenue terms, followed then by Seagate and Toshiba.

The quarterly decline in the HDD space was due to anemic demand for PCs as a whole, and excess inventory carried over from the earlier quarter also did not help.

Overall, PCs have been losing ground to smaller, more nimble devices. Both desktop and notebook PCs are being passed over by consumers in favor of flashier gadgets like smart phones and tablets, while the corporate and enterprise sectors are extending PC replacement cycles as businesses continue to remain cautious. Meanwhile, Ultrabooks and other ultrathins have not taken off as expected, delivering a further blow. And as media and PC tablets use rival forms of storage like flash or SSDs, even more opportunities are being taken away from the HDD market.

Still, HDDs have the lowest cost of any storage medium on the market, which means they will remain the final destination for the majority of digital content.

In particular, HDDs will continue to play a major role in storage for both the public cloud in the enterprise sector, and for the private cloud in the consumer electronics segment. And while the HDD industry is experiencing a setback for the time being, with results for the first quarter this year likely to be soft as well, growth will return in the long term, IHS iSuppli believes.

WD still on top,
but Seagate had stronger performance
WD was the top HDD supplier in the fourth quarter, even though its total was down 5.2% quarterly to 59.2 million units. Revenue amounted to $3.8 billion, also down by 5.2%. WD was the market leader in desktop HDDs during the period – the first time it has taken the crown in the desktop HDD space, most likely because the higher pricing of Seagate, especially in the 2TB product line, finally shifted consumer preferences toward the less expensive offerings of WD.

Seagate, despite being No. 2, was the only supplier that saw growth in shipments, up 1.5% to 57.6 million units. Revenue reached $3.7 billion, down 5.2% similar to the rate of revenue decline suffered by WD. Seagate lost the desktop HDD crown, but it retains the No. 1 position for unit shipments to the enterprise, just as the company bumped off WD from the notebook HDD peak, its traditional bread-and-butter. Seagate executed better than WD in its strategy for notebook HDDs, increasing its shipments at precisely the time that WD’s own notebook HDD shipments were declining.

Toshiba, the No. 3 player, shipped 18.4 million HDD units, down 3.3%. Revenue equated to $920 million, down 3.3% as well. Toshiba entered the desktop HDD market in the third quarter last year after merging with Hitachi, and the merger has helped boost its share of the overall desktop HDD space.

Based on projections, WD is likely to remain the market leader in both shipments and revenue during the first quarter this year.