Market– The macro trend continues to be storage moving towards SSD, however, the second half of 2016 is shaping up to be an interesting period for hard drives. The combination of supply tightening by the hard drive manufacturers and a reported looming NAND flash shortage for Q3 gives the drive manufacturers breathing room. In a similar fashion to the airline industry, the hard drive manufacturers see one another raise prices and follow with a nod and wink.
After a bruising two-quarters for the drive manufacturers, we expect pricing to continue to trend upwards with several authorized distributors announcing price increases.
Western Digital – Layoffs are generating the projected cost savings and making it easier to hold the line on pricing. Rumor has it they have achieved internal financial expectations for the quarter, which will only further harden their resolve to hold firm on pricing.
We are seeing supply tighten for 4TB, 6TB and 8TB capacities. However, this is not the result of a supply and demand imbalance, but the continued push to clean up the balance sheet.
HGST, a Western Digital Company – The market has been slow to adopt the recently released Hitachi 10TB drive with customers wanting to remain with the 8TB capacities because of the better cost performance ratio. Hitachi is reportedly restricting 8TB supply to move customers to the 10TB drive, which is spilling over into the other manufacturers as consumers scramble to find an 8TB supply. We are seeing authorized distribution sourcing product from the open market.
Toshiba – We are seeing prices creeping upwards and lead times stretching for both desktop and notebook, but not enough to impact the supply chain negatively.
The bigger news is Toshiba not reporting anything larger than 2TB capacities in their product roadmap, which would lend credence to rumors of the company exiting the hard drive market to focus on flash.
We are seeing continued demand for consumer-grade product (DM suffix) with authorized suppliers combing the open market.
Seagate – In last month’s report, we indicated that Seagate was the “Wild Card” in determining if pricing would hold. The shifting market dynamics for Q3 and Q4 takes some of the pressure off of Seagate, who is in lock step with WD, Toshiba, and HGST in raising prices.
We hear whispers of internal flux around their new business structure and customers report that Seagate has been difficult to do business with lately.
General Thoughts– Between consolidation and cost cutting, the manufacturers are getting their arms around their cost structures. This, combined with a pending flash shortage, sets the stage for an improved cost structure for manufacturers for Q3 and Q4, despite anticipated reduction in shipped units.
