Hard Drive Industry Takes Big Hit as SSDs Displace Demand

By Published January 18, 2017 at 12:05 pm

As solid-state storage continues to displace mechanical drives, so too does the constriction of the HDD market continue. As part of their ongoing plan to stay profitable and financially stable, Seagate has opted to shut down its HDD manufacturing facility in Suzhou, China. The Suzhou plant was one of Seagate’s largest production assets, and its resultant closure will acutely reduce the company’s HDD output.

However, this isn’t unforeseen, as last year Seagate announced its intentions to augment manufacturing capacities from around 55-60 million drives per quarter to approximately 35-40 million drives per quarter in accordance with their continued restructuring initiative. As part of that effort, Seagate reduced global employee headcount by 8,000 last year. Moreover, the closing of the Suzhou facility will see the layoff of a further ~2,200 employees.

Seagate is not alone in reducing their global footprint, as Western Digital announced last year intentions to close their head wafer manufacturing facility in Otawara, Japan, in a bid to remain competitive and profitable. Amid declining shipments of HDDs (which hit a multi-year low in 2016) due to a regressive PC market, the prevalence of SSDs (especially for low-end capacity devices), and the general weak demand for client HDDs, both Seagate and Western Digital will move forward with plans to optimize operational efficiencies to protect margins and respond to market trend and evolution.

Translation: Layoffs and price increases.

Henceforward, both HDD producers have targeted price increases on certain products within their portfolios and optimized roadmaps. In Q1 2016, Seagate began end of life activity on some of its older and lower capacity offerings (500GB and lower) as part of their strategy to not compete in the low capacity market, as that segment is being filled with entry level SSDs. Both HDD makers will continue to shift focus towards enterprise-class hard drives (mission critical and nearline drives), which has become the most lucrative part of the HDD industry in recent years.

Despite declining per-unit sales, the demand for capacity remains strong. The average capacity of drives continues to increase due to strong demand for high capacity products. In particular, Seagate’s “ongoing manufacturing reduction and the streamlining of their portfolio” is indicative of plans to shift build volumes towards their high-capacity SKUs. With the market reflecting continual drops in HDD shipments but also sustained growth in total storage capacity shipped, its incisive to believe HDD vendors could prioritize producing fewer drives while combining these drives with as many heads, platters, and as much technology as possible.

On that account, Seagate continues to optimize its technology roadmap by exploring new manufacturing technology and expanding the existing. HDDs remain viable in respect to cost-per-GB and serving as a means for mass storage. As such, mechanical drives will continue to evolve and adopt new technologies. Seagate and Western Digital are using helium-filled (vs. air) drives to increase capacity and reduce motor resistance. Seagate is also investing in TDMR (Two Dimensional Magnetic Recording) technology, and aims to have the first TDMR drive ready this year. Additionally, both Seagate and Western Digital continue to expand their SSD offerings, with both vendors debuting new solid state storage at CES 2017. 

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