HDD industry reports record revenue rates

The worldwide hard disk drive (HDD) industry rose to record revenue rates in the first quarter of this year.

According to the Storage Market report by IHS iSuppli, this was as a result of higher average selling prices, which were increased to compensate for the wreckage and loss in  shipments left by the October floods in Thailand.

It said that HDD revenue for the first quarter reached $9.6 billion, beating the previous record of $9.3 billion in the first quarter of 2010. The analyst company added that this record was notable because shipments during the first quarter stood at 145 million units- a drop from the
174 million units of the third quarter last year.

However, despite this record, the company warned that a full recovery to pre-flood shipment levels is not expected until the third quarter, one full year after the disaster.

Fang Zhang, storage analyst at IHS, said: “Revenue in the first quarter was up because of a rise in HDD average selling prices to approximately $66.28, compared to $51.49 in the third quarter before the flooding.

“The ASP will not return to pre-flood levels in the short term and will stay at elevated levels throughout 2012 and 2013, helping the HDD industry make up for some of the losses following the disaster.”

When it came to HDD manufacturers, Seagate Technology came out top, holding the largest share of revenue at 46 percent. It was followed by Western Digital with a 32 percent share, Hitachi Global Storage Technology at 11 percent and Toshiba also at 11 percent.

IHS iSuppli said Seagate’s first-quarter revenue of $4.45 billion included all shipments from the recently acquired hard disk business of Samsung. However it pointed out that even before this it had  been the leader in HDD revenue for the past decade,

Seagate was also claimed to have held down the top spot in HDD shipments for the last two quarters, after archrival Western Digital sustained heavy damage in Thailand and lost its pinnacle position.

IHS predicted that the company was likely to maintain its perch at the apex in both revenue and shipments for at least another quarter.

And it was also good news for Western Digital, which was claimed by the analyst house to have been given a “boost” from the Hitachi Acquisition.

It said for this company, the “revenue picture brightened if it included $614 million from Hitachi GST’s three-and-a-half-week revenue after the merger between the two was completed in March.”

However it said that without Hitachi GST’s portion, Western Digital’s first-quarter revenue would be slightly below its third-quarter, pre-flood level of $2.6 billion.

In the future, Western Digital expects revenue to hover between $4.2 billion and $4.5 billion, including full contribution from Hitachi GST. Western Digital’s HDD shipments during first quarter amounted to 44.2 million units, including the Hitachi portion at the time of the merger.

Also contributing to a healthier revenue picture for the HDD industry was a rise in gross margins and operating margins. IHS iSuppli said the higher numbers here were “positive indicators of the companies’ ability to pay down their fixed costs and were, therefore, reliable barometers of good financial risk.”

It said Seagate enjoyed a gross margin of 37 percent in the first quarter—a company record mainly due to higher ASPs—and also saw its operating margin reach 27 percent, up from 19 percent in the fourth quarter.

Western Digital also rode the wave with its gross margin climbing to 32 percent, and its operating margin rising to 18 percent. This was up from eight percent in the fourth quarter of 2011.