Its time for an update on the disk media market., based on reporting from The Register
's Chris Mellor here
WD's hard disk shipments were basically flat in unit terms but sharply up in exabytes
Financial statements revealed 39.3 million disk drives were shipped,
slightly down on the 40.1 million a year ago. But that's 81.2 disk
exabytes shipped, much more than the year-ago total of 66.1. The average
selling price per drive stayed the same at $63.
A look at the disk segment splits shows the long-term
slump in disk drive sales as flash takes over in PCs, notebooks and the
high-performance enterprise drive areas.
Note the graph showing a kickup in "Consumer electronics". This may represent more large customers deciding that cheaper consumer drives are "good enough" for bulk storage. use.
Seagate hard disk shipments were flat in exabyte terms, meaning a decline in unit terms
In terms of exabytes shipped – mostly in disk drives – Seagate said
enterprise mission-critical exabyte shipments were flat year-on-year,
and there was 4.5 per cent growth on the previous quarter.
Nearline high capacity enterprise capacity shipped
declined 14 per cent, while PC exabyte shipments were up 14.3 per cent
year-over-year. Non-compute exabyte ships were down quarter-on-quarter.
The reason is that Seagate was late delivering 10TB helium drives
, a favorite in the bulk storage market:
Luczo has Seagate focused on bulk storage of enterprise data on
high-capacity disk drives, yet shipments of such drives fell in the
quarter as Seagate missed a switchover to 10TB helium-filled drives.
Stifel analyst and MD Aaron Rakers sees Western Digital having an 80 per
cent ship share in this market.
This failure, and even more Seagate's failure in the flash market, had a big impact on Segate's revenues and their position against WD
The right-hand side of the chart shows the $2.4bn gap in revenues that
is the result of Seagate boss Steve Luczo's failure to break into the
flash drive business and being late to helium-filled disk drives.
Seagate is now a shrinking business while WD is growing.
Seagate's response has been to kick Luzco upstairs
Steve Luczo will go upstairs to become executive chairman of the board
on October 1, with president and chief operating officer Dave Mosley
taking over the CEO spot and getting a board slot.
He's supposed to focus on the long term, but this doesn't seem to be his forte. Mellor writes
Seagate says Luczo will focus on longer-term shareholder value creation,
whatever that means. As he’s so far avoided Seagate getting any more
involved in the NAND business than if it were playing Trivial Pursuit,
we don’t have high hopes for moves in that direction.
Seagate's poor performance poses a real problem for the IT industry, similar to problems it has faced in other two-vendor areas, such as AMD's historically poor performance against Intel, and ATI's historically poor performance against Nvidia. The record shows that big customers, reluctant to end up with a single viable supplier of critical components, will support the weaker player by strategic purchases of less-competitive product.
The even bigger problem for the IT industry is that flash vendors cannot manufacture enough exabytes to completely displace disk
, especially in the bulk storage segment
NAND capacity shipped in the second quarter, including for phones and
other smart devices (some 40 per cent if capacity shipped), and
enterprise storage, was about 35 exabytes. The total HDD capacity
shipped number was 159.5 exabytes, almost five times larger, with some
58 exabytes constituting nearline/high-capacity enterprise disk drives.
So bulk storage could consume nearly twice the entire flash production, leaving none for the higher-value uses such as phones. Note that these numbers, combined with Aaron Rakers' revenue estimates:
||Revenues in 2nd Quarter
imply that Flash averages $0.38/GB where HDD averages $0.036/GB, or ten times cheaper per byte.
So the industry needs disk vendors to stay in business and continue to invest in increasing density, despite falling unit shipments. Because hard disk is a volume manufacturing business, falling unit shipments tend to put economies of scale into reverse, and reduce profit margins significantly.
implies that capacity shipped will increase faster than revenues. The graph shows capacity shipped increasing while revenues decrease. The IT industry must hope that this trend continues without killing the goose that is laying this golden egg.
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