Seagate inflates 12TB helium drives, floats them to IT bods to test
We dig into hard-drive maker's plans for the next three months or so
Backgrounder Seagate is seeing the storage market shift from client server to mobile cloud applications and storage environments. Although responding to this, it is encouraged by the capacity needs of the remaining PC client as well as significant growth in non-PC-client devices and applications.
It talks of a new customer base that includes traditional OEMs and distribution customers as well as significant and growing demand from cloud service providers and surveillance companies, and will likely include corporate demand in the not-too-distant future.
Seagate thinks the rate of growth for storage demand in the near term is likely to fluctuate from quarter to quarter as major systems installations either aggressively deploy or absorb capacity.
Such cyclicality could be a stronger influence on disk drive demand than traditional seasonality.
In the earnings call, CEO and chairman Steve Luczo talked of the following:
- A "decision to accelerate the ramp of new products in our portfolio."
- "We believe Seagate's June quarter results are reflective of a generally stable but relatively benign macroeconomic environment, as well as an acceleration in the deployment of cloud-based storage associated with usage shifts of technologies and architectures by end users. Demand from cloud service providers was stronger than expected after several quarters of relatively modest demand from these customers."
- "With respect to our cloud systems business, we are making good progress in ramping new platforms and gaining new customers, offset by some demand softness from top-tier OEM and government customers."
- "The integration of Dot Hill is complete and we will be launching converged storage platforms including hybrid and all-flash array offerings later this fiscal year, which we believe are equal to or better than our competition."
- "Seagate's HDD unit shipments over the last five fiscal years have decreased 15 per cent, while at the same time exabyte shipments have grown 112 per cent and average capacity per drive has increased 133 per cent."
- "In the nearline enterprise market, our 8TB products were the fastest-growing products in units and revenue within our overall HDD portfolio this quarter. We expect the market to continue to shift towards this capacity point over the next two years."
- "We will be shipping our 12TB helium nearline enterprise test units for customer evaluation this quarter."
CFO Dave Morton said, "We continue to make strategic decisions to not aggressively participate in certain areas of the low-capacity notebook and gaming market, where the gross margin contribution does not warrant the long-term manufacturing investment."
Luczo said Seagate is not finished with restructuring actions, so we can expect another round of layoffs. He did mention NAND, almost in passing: "We're working in construction with our key NAND partners, who are enabling us to develop workload-specific and optimized products." There is no sense of any increase in urgency or commitment to the flash market by Seagate.
He did not mention ClusterStor, which could be a telling omission or just one of those things – probably the latter.
Seagate thinks it can grow and profit from the world's expanding need for storage for reliably increasing exabytes-shipped demand, which flash has no hope of significantly denting in the next five to ten years. This constitutes a bet against the combined effects of 3D NAND, TLC (and maybe QLC) flash, and any Chinese entry into flash fabrication on the disk drive market.
In Seagate's view, the high-capacity disk sweet spot is 8TB over the next few quarters, and it has a cost advantage as its air-filled 8TB drive has fewer heads and platters than WD's 8TB helium-filled drive. Western Digital thinks it will be a 10TB sweet spot instead. We should know who is right six months on, after two more quarterly rounds in the ongoing storage industry platter wars. ®