Western Digital Remains World’s No. 1 HDD Supplier

Due to severe declines in demand for hard drives, it does not look like HDD makers want to fight for market share. Western Digital controlled about 43% of the HDD market in Q1 2016, just like a quarter before. Seagate was the second largest supplier with 39.38% market share. If the HDD shipments numbers for Toshiba are correct, then the company controlled around 17% of the hard drive market, moving ever so slightly higher.

Seagate’s HDD Sales Drop Below 40 Million Units, Company Plans Capacity Adjustments, Product Cuts

Seagate sold 39.3 million hard drives in the first quarter of 2016, a 21.5% decline from the same period a year ago. Sales of Seagate’s HDDs dropped across the board - with the exception of nearline drives. During the conference call with investors and financial analysts, the company particularly noted weak sales of client HDDs as well as declines in shipments of traditional mission-critical drives. Moreover, in a bid to maintain margins, the firm decided to “not aggressively participate in certain areas of the low capacity notebook market,” which further drove its unit sales down.

As it appears, Seagate does not seem to be confident that the hard drive market will rebound in the foreseeable future. The HDD maker intends to cut-down its manufacturing capacities from 55 – 60 million units per quarter to approximately 35 – 40 million units per quarter, which will help it to reduce operating costs and maintain prices despite competition from traditional and emerging rivals.

“In the March quarter we began the process of reducing our HDD manufacturing capacity from approximately 55 million to 60 million drives per quarter to approximately 35 million to 40 million drives per quarter,” said Steve Luczo, chief executive officer of Seagate, in a conference call with investors and financial analysts. “The actions required will be completed within the next 6 to 9 months. At the same time, we will continue to accelerate the utilization of our own drive factories internally and media facilities.”

While Seagate does not detail its capacity-cutting plans, it indicates that it intends to shift build volumes to its higher capacity models, which will simplify wafer requirements, optimize the lineup and will eventually reduce costs. In particular, the company will discontinue some of its low-capacity client HDDs (250 GB, 320 GB and 500 GB), which will help to increase its ASPs (average selling prices) and margins.

“In [Q1 2016] we began end-of-life activity on some of the older 500 GB and below products that have very low margins,” said Dave Mosley, president of operations and technology at Seagate. “Most of the margin cost benefits of these products will be realized over the next few quarters.”

In fact, Seagate began targeted pricing increases across its product portfolio already in the third quarter of its fiscal year (i.e., Q1 2016), which could help to improve its financial results. The manufacturer believes that higher HDD prices are justified because HDDs are getting harder to make. Since the company decided not to participate in some areas of the low capacity laptop market, it is evident that it may leave it to makers of entry-level SSDs in the future.

“In the March quarter we initiated targeted pricing increases across our product line, we were successful in some areas and unsuccessful in other,” said Mr. Luczo. “We continue to believe the industry needs a stable pricing environment to deliver the higher level of requirements being placed on our products and to realize the value we are providing to the market. As a result, we will continue to pursue a pricing strategy that reduces and properly reflects the investment in technology the market requires.”

Shipments of Western Digital’s HDDs Fall to 43.1 Million Units

Western Digital shipped 43.123 million of HDDs in the first three months of this year, or 21% less compared to Q1 2015. Sales of the company dropped across the board due to the weak PC market and seasonality. Just like Seagate, Western Digital increased prices of certain products during the quarter. In particular, the company hiked prices of some of its 2.5” drives for notebooks and gaming PCs (which is probably the WD Black2 Dual Drive). Right now, the company is making selective price increases in the enterprise segment in a bid to maintain its ASPs and margins and sustain its ability to invest in the development of products.

“Because we want to make sure that we have got sufficient dollars to reinvest back into our business to continue to innovate and provide compelling products for our customers, we are making selective price increases in certain enterprise markets,” said Stephen Milligan, chief executive officer of Western Digital, in a conference call with investors and financial analysts. “At this point, we are not sure if they're going to stick, but we are certainly hoping that they do.”

Earlier this year Western Digital announced plans to optimize its roadmap and close-down its head wafer manufacturing facility in Otawara, Japan, in a bid to reduce costs and maintain its profitability. So far, the company has not announced plans to reduce its HDD manufacturing capacities significantly but said it would eliminate redundant facilities. The company also did not make any comments regarding the future of its low-end HDDs.

Toshiba’s HDD Shipments Drop Too

Since Toshiba does not disclose anything related to its hard drive business, it is hard to analyze this supplier. If estimations of HDD makers and Nidec are correct, then Toshiba’s HDD shipments in Q1 2016 should be around 17 million units, or 15% below its shipments in the same period last year.



Overview: HDD Shipments Down 20% in Q1 2016 Market Trends: HDD Capacities Increase, Average Price Flat
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  • Michael Bay - Thursday, May 12, 2016 - link

    Just how many games do you have to download to hit a terabyte?
    I do backup my games on an external HDD, and there are maybe 400GB for something like a hundred of titles!
  • Wolfpup - Thursday, July 14, 2016 - link

    My library long since outgrew my 4TB drives...though thankfully still fits inside 8TB (I think...I'm not done redownloading it ahead of the caps...)
  • olderkid - Thursday, May 12, 2016 - link

    I think the fact that you download a TB of games a month negates worrying about adding a wife and kids....
  • maximumGPU - Thursday, May 12, 2016 - link

    i lol'd!
  • FunBunny2 - Thursday, May 12, 2016 - link

    yeah, cruel.
  • Gothmoth - Thursday, May 12, 2016 - link

    wife and kids are useless.

    get a fuckfriend and live happy.....
  • azazel1024 - Friday, May 13, 2016 - link

    I suspect with that espoused belief, your desired goal is likely not achievable.

    But go get 'em tiger. Live the dream.

    On caps, any on a wire is stupid, but at least with a 1TB cap, that would be pretty hard to hit (without 4k video) for probably 99.9% of people. I know I am not the heaviest of heavy users, but my entire family of 5 hits around 500-600GB a month. That is about 7hrs per day of Netflix streaming between all 5 family members, though realistically it is a mix of Youtube minecraft videos, some Netflix, PBS kids, the rare game download, etc and probably working out to an average 2hrs per person per day.

    I am sure if we cut the cord entirely it would go up even more, but probably still pretty comfortably under 1TB. I am absolutely not advocating that caps are reasonable. I feel like it isn't unreasonable to say that there should be SOME super high cap, especially if the point is it is a residential connection and not supposed to be running a business, "servers", etc. The data does cost your ISP something if it goes outside their network, even if we are talking a penny a GB, so I don't think it is unreasonable to say that pushing/pulling something like 30TB of data a month is "okay", but your typical even 1TB cap is just stupid.
  • Wolfpup - Thursday, July 14, 2016 - link

    That little? I use about that much on months I'm not downloading much just for mostly myself, and I could go MUCH heavier on the streaming video..
  • Wolfpup - Thursday, July 14, 2016 - link

    *rolls eyes*
  • Wolfpup - Thursday, July 14, 2016 - link

    Yeah, I've been redownloading my library the past few months and using like 2TB+.

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