History 2001: Are We Facing First Sequential Decline in HDD Shipments Ever in 2001?

By Mark Geenen, president, Trendfocus

As we have repeatedly stated over the past 9-12 months, PC demand has been challenging. As global economic pressures expanded, IT spending has been slashed and resultant PC and enterprise system demand slackened.

Many have pointed to a surge in the second half of the year, but we cannot unearth any solid evidence of a remarkable turnaround. While results from 2CQ have yet to be officially released, our preliminary investigation points to a possible double-digit dip (again) in overall HDD shipments.

Each segment is feeling the brunt of slackening demand, with the PC and enterprise sectors getting hit hardest. Overall HDD shipments in 1CQ of 47.6 million will be nearly impossible to replicate in 2CQ (and 3CQ01 for that matter), meaning that through the first half of the year, HDD shipments will be only about 95 million (or 143 million through 3CQ under this assumption).

With last year’s total of just under 200 million as the target, the industry would need a tremendous increase in demand in 4CQ (20-25% in the quarter alone) to just match CY2000 shipment levels.

On the desktop side, the weakness in demand has been widely reported.

The combination of slowing corporate demand not only in USA but in Europe and Asia as well and declining consumer confidence has impacted PC buying patterns.

While 2CQ results are not surprising given seasonality, they are a typical given that 1CQ shipments were very weak due to inventory adjustments in the channel.

The most often asked question in the past few months is when will the market return to historic growth rates? Frankly, we are trying to assess if the market ever returns to these historic growth rates.

On the enterprise side, the slowdown in IT spending has clearly impacted the SCSI/FCAL opportunity. Servers and multi-user applications are not being replaced (or “added-on”) nearly as often as in prior periods and we see little evidence of this improving in the calendar year.

There are some people discussing the “death” of the enterprise market, but we do not subscribe to this thinking. Given the growth of IT over the next decade, it is clear to us that enterprise computing solutions will continue to be in demand (unless of course, one believes all necessary enterprise solutions are in place already, not only for today’s needs but all future needs).

This article is an abstract of news published on issue 163 on August 2001 from the former paper version of Computer Data Storage Newsletter.