Image via Wikipedia
Seagate announced that its acquisition of Samsung’s HDD business has completed. Western Digital and Hitachi have announced that the merger of Hitachi GST with Western Digital will be completed in March 2012. In order to complete the purchase Western Digital must sell one of Hitachi GST’s 3.5-inch drive factories. Toshiba, TDK and a possible Chinese buyer are the primary candidates for such a sale. If Toshiba was the buyer, after March 2012 there will be three HDD suppliers with relatively complete HDD product portfolios: Seagate Technology, Western Digital and Toshiba.
Although there was some impact on HDD manufacturers from the March 2011 Japanese tsunami and earthquake, in October and November 2011 massive monsoon floods in Thailand inundated HDD plants run by Western Digital and Toshiba and manufacturing plants of many HDD components. As a result, the supply of HDDs in CQ4 2011 will be down 60-70 M from an expected demand of 180 M units and HDD prices reached much higher prices. In the retail HDD market prices of 2X or more in November were not uncommon. Although prices have declined towards the end of the 4th quarter of 2011, drive shortages combined with industry consolidation will result in higher prices for HDDs through 2012 and possibly long term.
Even with the price increases, HDDs will remain a less expensive storage technology than flash memory. Flash memory is expected to show significant price declines (to probably less than $0.50 per GB) in 2012 due to the introduction of 20 nm flash memory technologies, leading to more storage capacity per flash memory chip. Also there is excess flash memory production capacity compared to demand. Less expensive flash memory will lead to some HDD displacement but even more likely it will lead to greater use of flash memory as a caching or acceleration technology in regular computer architectures—including ultrabooks.
Another interesting development at the end of the year is that both Seagate and Western Digital have both announced that they are slashing warranty coverage on many consumer HDDs. There was an attempt to reduce HDD warranties about a year ago that the HDD companies backed away from in early 2011. Warranties on many consumer HDDs are being reduced from 5 years to 1 year. It is quite likely that the current warranty reductions are tied to industry consolidation and shortages of HDDs making such measure easier to implement without impacting HDD sales.
The maximum warranty for consumer HDDs from the two companies will be 3 years. Lowering the warranty period for HDDs closer to that of other consumer electronic products will free the financial reserves needed for the longer warranty to be used in product development. Seagate seemed to imply that longer drive warranties may be available for HDDs with higher prices in the near future.
Current HDD technology development (in terms of areal density growth) appears to have slowed to about 25% annually until new technologies such as shingle write and heat assisted magnetic recording can be implemented. These new technologies (especially heat assisted magnetic recording, HAMR) will require considerable investments in equipment and process development and higher HDD prices and shorter warranties may help in making these investments.
As the impacts of the monsoon floods dissipate in 2012 and as HDD company consolidation continues there will remain 3 strong HDD competitors with a stronger financial position than they have had for some time. If the HDD companies invest this new capital in developing and introducing new technologies to boost areal density growth they can continue to be the low cost high access rate storage device of choice for many applications.
2012 and future years will see changes in the way that HDDs are used and lead to a greater use of flash memory in more and more computer and enterprise applications (often in combination with HDDs). There may also be at least a short term boost in the use of tape technology, particularly for long term archival storage. Storage architectures will be more complex and interesting in future years at the same time that storage demand is swelling and increasing the storage capacity of all known technologies becomes more challenging. Natural disasters as well as technological events have made 2011 a long and strange year for HDDs. New storage applications and requirements and recovering HDD supply will be big drivers for storage in 2012.
