Strong HDD High Capacity Nearline Demand With 16TB Emerging

This is an Executive Brief from Trendfocus, Inc.:

Japan company Meetings Confirm Strong High Capacity Nearline Demand,
with 16TB Emerging

Over the past week, the Trendfocus team was once again in Asia, looking into HDD build plans and end-demand for HDDs for the remainder of 2019 and into 2020.

From a build plan perspective, client HDDs are following the muted seasonal patterns forecasted after some of the demand was pulled into 2CQ19 due to the fear of rising tariffs. While some consumer-related products such as PCs will not suffer tariff increases until mid-December, the ongoing saga of U.S./China trade tensions has weighed on economic growth and continues to threaten further slow-downs in consumer and corporate spending.

Although China cloud demand remains muted, the strength of US tier-1 hyperscale storage requirements continues. Strong upsides to 14TB nearline as well as increases in requirements for both 10TB and 12TB capacities have kept HDD makers busy and may point to a slight shift in mix between the three capacities through the remainder of the year as compared to Trendfocus’ August forecast.

Even supply chain players have seen upsides in component demand following a couple of weak quarters for some.

Build plans for nearline in 4CQ19 are an astonishing 18 million+, which remains far above actual demand and eventual shipments.

These huge build plans have held since July and point to some planning on building significant quantities of new products to address 14TB and 16TB capacity points.

Even though large cloud is still actively ramping up 14TB purchases, rumors of a large hyperscale company already completing qualification of 16TB could mean that at least one company begins the transition to the latest capacity starting in 4CQ19.

However, similar to the last hyperscale expansion cycle in late 2017/early 2018, where both 10TB and 12TB demand was split between large cloud customers, we may see 14TB and 16TB ramping concurrently with some opting to move to 16TB over the coming quarters while others accelerate 14TB purchases. This activity would essentially pull-in the 16TB ramp to about one quarter earlier than Trendfocus’ forecast as published in August.

SMR nearline adoption remains nascent, with only low volumes shipping to the market compared to CMR. Large volume shifts to SMR appear on hold until some vendors sort out their host-managed schemes to better meet performance requirements. In addition, the quick succession of planned CMR capacities through 18TB expected in 2H20 may defer the adoption of SMR until 20TB SMR (built off of 18 TB CMR platforms) also emerges later in 2020.

Finally, after 18TB CMR, the viability related to the timing to reach 20TB CMR remains very uncertain. Will it occur in 2021 per our current forecast, or will it push out until 2020?

Also, if a shift to high-volume HAMR or MAMR pushes out beyond 2022, the pressure to add an extra disk will become so great that a 10-disk nearline drive may come to fruition. All HDD companies continue to assess backup plans for 10-platter drives, some more seriously than others. One new takeaway from this Asia swing is the idea that a super-thin disk required by some to cram 10 disks into a drive may not necessarily require a shift to glass substrates, providing a longer-term positive opportunity for the aluminum substrate supply chain.