Thursday, December 15, 2011

Notebook HDD may recover by 1Q12, desktop HDD to see improvement in 2Q12

TAIWAN: According to DRAMeXchange, a research division of TrendForce, the Thailand flood-induced HDD supply chain disruption has resulted in a 4Q global PC shipment shortage of approximately 4 million units, of which 3.5-inch desktop (DT) HDD accounts for around 80 percent.

From the market perspective, the notebook (NB) HDD shortage occurred around mid-November, right after the traditional peak shipment season in October. Therefore, the 4Q NB shipment decline only increased slightly, from 3.4 percent to 3.7 percent. The DT market decline, on the other hand, increased from the initially forecasted 5 percent to 15 percent.

DRAMeXchange indicates, around 40 percent of global HDD production comes from Thailand. Of the companies affected by the flood disaster, Western Digital’s two plants and the Toshiba plant suffered the hardest hits, accounting for approximately 20-25 percent of the global shortage. Thus, PC OEMs immediately sought to prevent disruptions to their HDD supply.Source: DRAMeXchange, Taiwan.

First-tier US PC OEMs’ shortages were relatively minimal due to their large shipment volumes and deeper ties with HDD makers. Japanese maker, Toshiba, and Korean makers were also relatively unaffected, as they benefitted from having their own capacity.

Smaller Japanese makers and other PC OEMs in Asia, on the other hand, suffered more severe shortages as they lack the support of major HDD manufacturers. The retail channel market has seen the greatest price increases, as HDD makers are giving priority to companies they have close cooperation with; this has indirectly affected the DT and DIY markets. Furthermore, in consideration of supply, profitability, product demand, and client relationships, HDD makers are reallocating capacity to favor 2.5-inch HDD production, exacerbating the DT HDD shortage as well as the quarterly decrease.

Looking towards the next quarter, concerns towards HDD key component part supply will slowly dissipate and HDD makers in other countries, including China, the Philippines, Malaysia, etc. will increase their capacity utilization rate, making up for the capacity loss in Thailand. Furthermore, as Thailand’s transportation has returned to normal, Hitachi and Seagate’s distribution centers will be able to resume operations shortly. As for demand, alarmed PC OEMs were stocking up HDD inventory early on, but have currently returned to more rational strategies.Source: DRAMeXchange, Taiwan.

As HDD contract price has increased by 20-30 percent, PC OEMs are decreasing shipment volumes, planning to clear inventory via retail channels while they wait for HDD supply and price to stabilize. As for next year, overall NB HDD supply and demand may return to normal in 1Q12 at the earliest, while DT HDD may see supply and demand balance in 2Q12.

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