Slowdown in HDD shipments signal trouble for PC market

Dr. Robert Castellano, The Information Network.

NEW TRIPOLI, USA: A drop in demand in Q2 2010 could signal a slowdown in the rampant growth of the PC market in 2H 2010, according to according to a new report from The Information Network, titled The Hard Disk Drive Industry: Market Analysis and Processing Trends.

The worldwide PC market is up 25 percent in 1H 2010 over the same period in 2009. Looking further down the supply chain, HDD shipments in Q2 2010 were down 4 percent sequentially, but up 23 percent from Q2 2009. There were several factors in the drop: weakness in Europe, destocking by OEM customers, and a shift in ordering patterns by OEMS as they took advantage of lower cost sea versus air freight.

In accord with our findings, DigiTimes reported, “PC vendors have lowered their shipment goals by 5-10 percent for the third quarter as inventories have piled up due to weaker-than-expected second-quarter sales in Europe.” The European credit crisis led to some purchasing pause by retailers for a number of weeks due to the euro-exchange fluctuation, and there was relative weakness in the consumer space in Q2 2010.

Average HDD prices decreased by 2 percent on average in the second quarter, and are expected to remain flat in the third quarter.

For Q1 and Q2, WD shipped more HDDs than Seagate – 800,000 more in Q1 and 3 million more in Q2. In contrast with the overall HDD market dropping 4 percent sequentially, WD shipped 19.9 million mobile drives in Q2 2010, compared to 16.9 million in Q2 2009 and 19.8 million in Q1 2010.

In a May 13, 2010 Insight article, we stated that the mobile HDD market, which is WD’s strength, will outperform the desktop PC market, which is Seagate’s strength, in 2010. That's one of the factors in our forecast that WD will move ahead of Seagate in 2010. Shipments for 1H 2010 further substantiates our forecast.

The HDD market is on track to record a growth of 22 percent in unit shipments to 680 million units in 2010.