Tuesday, October 23, 2012

Peak Disk?

Thomas Coughlin has a blog post up at Forbes entitled "Have Hard Disk Drives Peaked?". It continues the optimism I poked fun at in Dr Pangloss' Notes From Dinner, concluding:
Have hard disk drives peaked?  We don’t think the evidence supports this yet.  There is just too much digital content to be stored and more HDDs may be required than in prior years to keep this growing content library.  While the market for regular computers has certainly been impacted by smartphones, tablets and other thin clients that are served by massive data centers through the cloud there is still a market for faster personal computers using flash memory (especially in combination with HDDs).  Thus we don’t think that HDDs have peaked but instead that they could experience significant annual growth in a stronger economy.
It sparked a spirited discussion on a storage experts mail list but, as with the dinner Dr. Pangloss attended, the underlying assumption was that the demand for storage is inelastic; people will just pay whatever it takes to buy the 60% more storage for this year's bytes as compared to last year's.

Coughlin is talking about unit shipments, and he estimates:
overall shipments of HDDs in 2012 will be about 592 M (down about 5.2% from 2011).  This estimate for 2012, combined with the drop in 2011 means that HDDs have experienced two consecutive years of shipment decline,
Summarizing the discussion, there appear to be six segments of the hard disk business, of which four are definitely in decline:
  • Enterprise drives: Flash is killing off the systems that enterprises used to use for performance-critical data. These were based around buying a lot of very fast, relatively small capacity and expensive disks and using only a small proportion of the tracks on them. This reduced the time spent waiting for the head to arrive at the right track, and thus kept performance high albeit at an extortionate cost. Flash is faster and cheaper.
  • Desktop drives: Laptops and tablets are killing off desktop systems, so the market for the 3.5" consumer drives that went into them is going away.
  • Consumer embedded: Flash and the shift of video recorder functions to the network have killed this market for hard disks.
  • Mobile: Flash has killed this market for hard disks.
Two segments are showing some growth but both have constraints:
  • Enterprise SATA: Public and private cloud storage systems are growing and hungry for the highest GB per $ drives available, but the spread of deduplication and the arrival of 4TB drives will likely slow the growth of unit shipments somewhat.
  • Branded drives: This market is mostly high-capacity external drives and SOHO NAS boxes. Cloud storage constrains its growth, but the bandwidth gap means that it has a viable niche.
Note that Coughlin's numbers include both 3.5" and 2.5" drives. His numbers, but not his optimism, are supported by Western Digital's numbers for the last quarter, which show a continuing downturn in shipments. WD says:
"There are several dynamics currently limiting market demand: first, global macroeconomic weakness, which is impacting overall IT spending; second, product transitions in the PC industry; and third, the continued adoption of tablets and smartphones, which is muting PC sales growth."
But they too believe that demand for storage is inelastic:
because customers have to "store, manage and connect the massive and growing amounts of digital data in their personal and professional lives. This opportunity extends well into the future".
No doubt Dr. Pangloss would agree.


David. said...

Seagate's first quarter results also show a drop in shipments. Both companies' net income was again significantly higher than before the floods, showing that the consolidation of the industry has had a permanent effect on margins.

David. said...

NetApp is generally thought to consume about 10% of the total disk shipments. Their 2Q FY2013 results (PDF, page 8) show modest 16% year=on-year growth in bytes shipped, probably not enough to compensate for the increase in average per-drive capacity. So they support the idea that unit volume is falling. The table also supports the idea that the only significant growth is in SATA drives;