4Q17 HDD WW Shipments at 100-103 Million, SSD Pricing Showing Initial Downward Movement

Here is a Trendfocus, Inc.‘s Executive Brief following the trip of president Mark Geenen in Asia:

Asia Travel: Revisiting 4CQ17 HDD Shipment Forecast and NAND/SSD Market Update

A swing through Japan, China, and Singapore confirmed our earlier expectations that 4CQ17 HDD shipments should be in the range of 100-103 million.

This is slightly less than expectations, and is owing primarily to slightly weaker gaming demand. Theories abound as to the actual TAM, with some indicators pointing closer to 100 million HDDs; however, other data points indicate that demand will sustain a TAM closer 103 million, suggesting that stable PC demand will support the higher HDD unit projection – notebook ODM production rose 11% for the month of November.
 
Nearline HDD competitive landscape changing? Western Digital pioneered the helium-filled capacity-enterprise (nearline) at 6TB, and was first to market with the latest 10TB model. Seagate is successfully increasing output of its own 10TB He model and has taken significant share at that capacity point. Missing from this conversation has been Toshiba – until now. Jockeying with segment leaders Seagate and WD, Toshiba announced its first helium-filled nearline drives at 14TB (9 disks) and 12TB (8 disks). Promised sampling and delivery, especially of the 14TB models is competitive, time-wise, with the segment leaders. With hyperscale companies looking for ever-higher storage capacities as well as a more dynamic HDD supply base, Toshiba has an opportunity to shake up the capacity-enterprise segment in 2018.  
 
A brief swing through China also confirmed that OEM server manufacturers continue to serve largely traditional enterprise markets, while the cloud players in the country have shifted to ODM equipment suppliers, similar to the U.S. market.

At the server level, SSD adoption is mostly lower capacities of 480GB and 960GB SATA SSDs; however, adoption of U.2 PCIe is emerging with 1.6TB as the primary capacity.

Despite the growth of cloud players in China, OEM server and storage companies continue to see solid business, supporting corporate, telecommunications and, especially government data center needs.
 
Although there is general agreement that overall 2018’s SSD pricing will continue the slight downward trend that started in 4Q417, some vendors may be a bit more aggressive than others based on status of various SSD qualifications with their latest NAND product. In addition, the assumption is that NAND supply is catching up and should reach equilibrium with demand by mid-2018. If price trends are any indication of supply status, there could be a scenario that has SSD prices falling 18-22% in 2018.
 
Notebook PC SSD attach rates for 2017 are tracking to reach approximately 38% and growing to more than 40% in 2018 due to falling SSD prices. Desktop PC attach rates continue to trail notebook PCs and will end around 13% for the year and grow to above 17% for 2018.
 
For enterprise SSDs, even though SAS saw a down quarter in 3Q17 (due to some demand pullback by some vendors and reallocation by others), various companies are still committed to this segment and anticipate growth over the short to mid-term. There continues to be debate on if/when PCIe will start to erode the SAS SSD market from a unit perspective, but regardless, PCIe exabytss shipped is expected to grow. With that said: there is general consensus that SATA SSDs will be the first segment to feel the effects of the PCIe transition.
 
Soap opera ends? WDC and Toshiba have finally resolved their months long dispute on the sale of the memory chip business. In the agreement, WDC will participate in the new fab expansion on an equal share basis for investments. In return, WDC will gain access to all IP, which had been a sticking point between the two entities. As such, WDC will no longer block the sale of Toshiba’s portion (TMC) to Bain Capital and its consortium partners.

The settlement is actually good for both sides. Toshiba finally gets its wish – to sell its TMC business and WDC gets guaranteed access to Toshiba’s future NAND factories, supply, and technology. More importantly, WDC gets all of this without having to buy TMC and be saddled to manage, operate, and fund an entire NAND business solo.
 
As 2017 comes to a close, the markets consuming storage devices continue to anticipate a re-balancing of NAND supply versus demand, with early SSD pricing signals showing some initial downward movement after nearly a year and a half of elevated pricing.

Large cloud demand for nearline HDDs also appears very strong, with the impending transition to 12TB models beginning in earnest by early 2018.

2018 may be a turbulent year for storage demand as the various application segments within both the HDD and SSD markets witness significant shifts in usage patterns due to pricing movements, technology and interface transitions, as well as increased competition between device suppliers.