This Executive Brief was posted on March 5, 2018, by analysts from Trendfocus, Inc.‘s team.
CQ1 ’18 HDD TAM Upside?
Following a seasonally strong CQ4 ’17, where HDD shipments nearly reached 105 million, CQ1 ’18 original forecasts projected a sharp seasonal decline to around 91 million HDDs, with reductions in both client and enterprise HDD shipments driving the lower TAM.
Nearline HDDs, which posted an all-time record of 12.25 million in CQ4 on the strength of cloud demand for 10TB models began to transition to the next-generation 12TB capacity point, also driven by hyperscale/cloud companies. Historically, nearline capacity shifts by cloud customers have typically resulted in a pause in nearline unit demand and many times these shifts have also driven down exabytes shipped for a quarter or two as the deployed capacity is utilized.
Notably, hyperscale/cloud demand for nearline appeared to remain strong in CQ1 ’18 with supply tightness seen in both 8TB and 10TB HDD availability.
A component shortage seen by at least one HDD supplier has contributed somewhat to the high-capacity nearline tightness, but HDD suppliers, sensing continued hyperscale demand, have prioritized production and sales to their key cloud customers.
As a result, nearline HDD shipments in the first calendar quarter of 2018 may rise sequentially and post another record quarter. 10TB demand appears at least as strong in CQ1 ’18 as it did in CQ4 ’17 (where over four million 10 TB nearline HDDs shipped) and could surpass last quarter. Combining that with accelerating transitions to 12TB and 14TB SMR, some estimates put nearline HDD shipments in CQ1 ’18 as high as 13 million units instead of a sequential unit reduction, as previously forecast.
Performance enterprise HDD shipments will decline after having posted a strong seasonal uptick in CQ4 ’17, but demand from at least some major server OEMs tracked at levels ahead of the HDD companies’ forecasts for CQ1 ’18. While TAM movements for performance enterprise HDDs are small in terms of actual unit shipments, and this sector continues a long-term secular decline based on changing end-market demand for performance storage, the category continues to satisfy cost-sensitive low-end and mid-range servers and, to a lesser extent, storage customers. In their heyday, performance enterprise HDDs consistently shipped eight million units per quarter but that has fallen into the five million to six million range over the past two years and should dip into the mid-four million range in 2018. That said: shipments of 10,000rpm and 15,000rpm HDDs combined could exceed five million in CQ1 ’18.
Client demand overall is down seasonally, but perhaps not as much as originally thought. While falling SSD prices and relatively stable PC demand for 2018 will continue to pressure HDD shipments throughout the year, demand for client-based HDDs across the various sub-categories appears to be stable and may temper the quarter-over-quarter decline.
Taken together, we will likely estimate (preliminarily) CQ1 ’18 HDD shipments in the range of 94 million to 95 million units, a bit better than our forecasted number. The slight improvements over the forecast will likely not materially change the outlook of a 5% TAM reduction for all of 2018, but the continued support for HDDs from relatively steady movements in end-market demand and the absence of free-falling NAND pricing (for now) bodes well for relatively predictable HDD shipments over the next few quarters.
HDD Shipments Fell to 404 Million in 2017 – Trendfocus
Third consecutive year of lower annual shipments
2018.02.23 | Press Release | [with our comments]
Preliminary 4Q17 Results: HDD Shipments Flat Q/Q at 104-106 Million Q/Q – Trendfocus
403 million in 2017 down 5% from 2016
2018.01.17 | Press Release