During the last half of 2012, the HDD market was finally seeing a complete exit from the negative impacts of the disastrous 2011 Thailand flooding that wiped out much of the HDD manufacturing supply chain (see Smith's MarketWatch Commentary, and our contributed content to EBN here and here, for more details).
Supply chain shifts open new competition
Importantly, during 2H12, as the HDD supply chain was in its final recovery stages, some critical shifts occurred among the major HDD suppliers; namely, Toshiba brought the first of the 3.5-inch hard drive product lines into full production for the consumer and commercial desktop markets. Toshiba's entry into this market sector was the result of a decision by the US's Federal Trade Commission (FTC) ruling on Western Digital's (WD's) asset holdings. The ruling stems from WD's "proposed acquisition of rival Hitachi Global Storage Technologies Ltd. [that] would likely have harmed competition in the market for desktop hard disk drives used in personal computers," according to the FTC. Had WD been allowed to hold the Hitachi assets, the global market for desktop HDDs would have been held by WD and Seagate alone, obviously impeding healthy competition, fair pricing, and innovation.
Toshiba's market opportunity was realized almost a half-year after the ruling, in late 2012, when their powerful DT01ACA series entered the market for consumer and commercial desktops. Adding flexibility, 7200 RPM performance, 16% reduced idle power consumption, and up to 3TB capacity, among other best-in-class features, this new line of Toshiba desktop HDDs keeps the competitive edge real as SSDs continue to put pressure on the HDD market.
Opportunities and challenges in 2013 +
Now, in 2013, we see continued opportunities and threats facing the HDD market as a result of the wider market pressures facing desktop and laptop computers more generally. SSDs are forecasted to rise in 2013 due to continued NAND price declines and increased consumer interest in SSDs or hybrids (see iSuppli's report). However, despite these continued – and rising – challenges from SSDs, HDDs will remain the standard, albeit with revenue forecasted to be flat and then declining over the next few years into 2016. The upside to the HDD challenges is that, with the price advantages over SSDs still, HDDs are holding steady thanks to the interest and rising adoption of Ultrabooks and to price-conscious consumers.
Commercial opportunities are also building for HDDs, and herein lies the importance of the FTC's ruling. Both Seagate and WD are set to continue the competition for top spot in the HDD supplier arena, while Toshiba's new HDD line offers additional competition for enterprises (see the latest from iSuppli). This competitive opportunity should support the HDD market's ability to hold steady for this and the next few years, minimally, due in large part to the cost advantages for enterprises as the demand grows for increased storage solutions to handle the growing Big Data analytics and database needs.