Business | September 08, 2011
HDD shipments rise 4% in 2Q
Despite the impact of the Japan earthquake, shipments of hard disk drives (HDD) edged up in the second quarter, according to IHS iSuppli.
For the quarter ending in June, HDD shipments amounted to 167.1 million units, up 4.1% from 160.5 million in the first quarter. Western Digital led the market with 32% of global unit shipments, followed closely by main rival Seagate Technology at 31%. Seagate, previously the shipment leader in the space, has been unable to overcome Western Digital’s market share advantage. The rest of the HDD market in the second quarter was divided among Hitachi Global Storage Technologies at 16%, Toshiba/Fujitsu at 11% and Samsung Electronics Co. Ltd at 10%. “Despite some disruptions resulting from the Japan quake disaster in March and the continuing decline of netbook sales because of tablet devices, HDD shipments rose during the second quarter, with each hard drive maker meeting its revenue forecast,” said Fang Zhang, analyst for storage systems at IHS. “Growth was achieved partially from a pull-in of orders by PC manufacturers fearing a potential shortage of components from the quake’s impact, and also by suppliers utilizing less expensive sea freight to ship goods instead of costly air freight.” Western Digital shipped 53.8 million HDDs in the second quarter—the most ever in the company’s history—up 6% from the previous quarter. Revenue totaled USD 2.4 billion, second only to Seagate at USD 2.9 billion because of Seagate’s larger share in the business enterprise segment, which commands higher average selling prices. Despite the record shipments, Western Digital suffered margin erosion, with its non-Generally Accepted Accounting Principles (GAAP) operating margin at 6.4% in the second quarter, caused by a number of factors including a broader pricing decline, increased investment in new products, and higher acquisition- and litigation-related expenses. Meanwhile, runner-up Seagate during the same period shipped 52.3 million HDD units, up 7.2%. Like Western Digital, Seagate also suffered margin erosion with a slightly lower non-GAAP operating margin of 4.4%, attributed to higher commodity prices, increased competition, the lower margin of notebook disk drives and slower technology transitions. Another factor that may be impacting Seagate’s margin is the recall of some of its 1-terabyte mobile drives, produced in July for the 21.5-inch and 27-inch iMacs from Apple. Moving forward, HDD shipments in the third quarter will rise 3.4% because of anticipated sales increases during the back-to-school and pre-holiday season on the consumer front, as well as continued corporate PC upgrades driving the enterprise segment. In particular, the enterprise space will remain strong due to new microprocessors such as Sandy Bridge and Romley from Intel Corp., and Bulldozer and Interlagos from Advanced Micro Devices Inc. The adoption of these new processors by enterprise businesses, which demand higher performance for server and storage virtualization, will lift enterprise HDD demand in the second half of this year, IHS believes.
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