In the wake of two massive and tragic natural disasters, worldwide hard disk drive (HDD) unit shipments experienced a year-over-year decline of 4.5% in 2011. Although efforts to clean and repair flooded factory buildings and equipment will take most of the first half of 2012, HDD and HDD component production is expected to return to preflood output levels in the second half of this year. According to a new forecast from International Data Corporation (IDC), the HDD industry will record year-over-year unit shipment growth of 7.7% in 2012 and a compound annual growth rate (CAGR) of 9.6% for the 2011-2016 forecast period.

Due to the imbalance in supply and demand that resulted from the Thailand floods, HDD prices have moved higher in recent months. HDD vendors are taking advantage of this opportunity to reset prices and recover some of the excessive price erosion that began in 2009. IDC expects year-over-year HDD revenue growth to exceed shipment growth in 2012, a precedent for the industry. Assuming the industry is successful with hybrid solid state hard drives (hybrid SSHDs), industry revenue could approach $50 billion by 2016 with a 2011-2016 CAGR of 8.6%.

"In many respects, the hard disk drive industry has collectively hit the 'reset' button," said John Rydning, research vice president, Hard Disk Drives at IDC. "A reset of the HDD industry structure should allow for the remaining HDD industry participants to slowly reduce HDD prices from current levels at a rate that still delivers value to customers, while at the same time ensuring sufficient funding is available to develop new HDD technologies that are needed to improve HDD capacity, performance, reliability, power consumption, and security. Still, long-term revenue growth will only be realized if the remaining participants transform into storage device and storage solution suppliers with a broad range of products for a wide variety of markets."

One of the major themes affecting the HDD forecast is the shift in demand for HDDs in client devices. While PCs will continue to represent the largest market for HDDs in terms of unit shipments, revenue derived from HDDs shipped for PCs is projected to decline over the next five years. In contrast, HDD demand from personal storage, entry-level storage, and enterprise applications (combined) is increasing. This reflects the broader trend to store more content in large datacenters and centralized storage devices in the home or in small businesses, thus making content accessible to a wide range of consumption platforms, including media tablets, smartphones, PCs, and other connected wireless devices. The longer-term implication is that enterprise storage - as opposed to storage in PCs and CE devices - will at some point become the major consumer of HDDs, as it was early in the life of the HDD market.

Another important theme is the intensifying battle with solid state drives (SSDs) in notebook PCs. While SSDs offer some performance advantages over conventional HDDs, SSD pricing continues to be an inhibitor to adoption in new PCs. Another way to achieve faster PC performance without incurring the full costs of SSD is to use a smaller amount of NAND somewhere in the PC system in combination with rotating magnetic disk storage. To win this battle, HDD vendors will need to convince PC manufacturers that hybrid SSHDs offer a more cost-effective solution to improve PC performance and responsiveness than other solutions.

The IDC study, Worldwide Hard Disk Drive 2012-2016 Forecast: The Industry Hits the Reset Button (IDC #233547), provides insight into hard disk drive industry shipments and revenue for the 2012-2016 forecast period. Trends in end-market devices affecting HDD demand are assessed while HDD technology advancements are factored into expected average HDD capacities. The HDD industry structure and relevant industry dynamics along with expected new HDD product features are used to estimate average sale prices and industry revenue.