Trouble at t'spinning rust mill: Disk drive production is about to head south
Bad news – if your name is Seagate or Toshiba
+Comment A sea change is looming in the disk drive industry as drive spindle motor maker Nidec reduces its total disk drive demand number.
Nidec is a Japanese company and has the largest market share of any such manufacturer.
It foresees demand for about 400 million units in 2016, down 13 per cent from its previous October 2015 estimate of 459 million.
It foresees 376 million disk drive shipments in 2017 and then 357m, 343m, and 333m units shipped in 2018, 2019, and 2020.
Analyst haus Stifel Nicolaus' MD, Aaron Rakers, says Nidec expects “PC-related HDD shipments to decline from ~204 million in 2015 to ~160 million in 2016 and then 135, 116, 99, and 84 million units shipped in 2017, 2018, 2019, and 2020; virtually a halving of unit demand in five years.”
This backs up our notion that Seagate and WDC are facing collapsing desktop/notebook disk drive sales.
High-capacity (nearline) enterprise HDD shipments are now estimated to grow from 37 million units in 2015 to 48 million units by 2020. This is a radical slowdown compared to an April 2015 forecast showing growth expectation of growing from 44 million in 2015 to 91 million units shipped by 2020.
Rakers tells us that Nidec expects shipments of Consumer Electronics (CE) drives to remain flat from 2015 to 2020 at 84-91 million/year while external (retail) HDD shipments are estimated to decline from 105 million in 2015 to a 92-94 million/year range from 2016-2020.
Overall Nidec expects:
- C2Q16 HDD shipment TAM to be approximately 95 million, down from the 98 million ship TAM in C1Q16 (vs. initial 100 million estimate)
- C3Q16 HDD industry shipments to be 102 million
- 105 million in C4Q16
- C1Q17 HDD industry shipments are expected to be 98 million
Stifel has modelled the HDD industry using a capacity-shipped metric instead of unit shipments. Rakers wrote: “Our model also implied an industry revenue estimate declining from $27 billion in 2015 (-14 per cent y/y) to $20.2 billion by 2020, or reflecting a -6 per cent CAGR.”
Not that great an opportunity for offsetting, then.
If all this is true, Seagate, under CEO Steve Luczo, with hi-cap drive growth a central strategy, and with relatively little flash drive capability, is going to face a severe decline in revenues. It can be expected to bulk up its flash-based deal with Intel. WDC is better positioned because of its much larger flash product investments.
We need to understand the capacity forecast as well, which Nidec is not that concerned about. Its product only spins the platters. If the HDD manufacturers can increase capacity fast enough then they can charge for that and offset the declining unit numbers.
Is this it? Is this the sun setting on the disk drive industry, the start of its transition to a tape-like shadow of its former self? On the basis of these Nidec forecasts, and if backed up by its own, Toshiba could decide to exit the disk drive business.
They say one swallow doesn't make a summer, nor one frost a winter. But we say, in the disk storage Game of Thrones, winter is coming, and there is no high-capacity Ice Wall to protect the disk drive business from the flash White Walkers. ®