In early November The SSD Guy published a post that argued that Thailand’s floods would not make much difference to the SSD market.
Since that post not only has the argument gone less in favor of SSD adoption (thanks to a high level of HDD finished inventory, some changes in shipping practices, and a heroic effort from Thailand’s HDD makers and the Thai people to overcome this disaster) but the promotional efforts in favor of SSD adoption have become stronger.
Objective Analysis has spoken since the floods with a number of companies who either produce HDDs or HDD sub-assemblies, or consume HDDs, and this is what we have found:
- Enterprise HDDs, those most threatened by SSDs, are the highest-margin products manufactured by HDD makers. If any HDD falls into shortage it will be not the enterprise but the client HDD, whose manufacturing capacity will be sacrificed in favor of enterprise HDDs.
- The OEMs who use enterprise HDDs use them in their highest margin products. This means that these OEMs will put the most pressure on enterprise HDD makers to keep them supplied with the enterprise HDDs they need.
- Those most likely to be hurt by any shortages will be lower-tier users of client HDDs. This includes smaller PC makers and after-equipment companies, most notably those who re-package HDDs into USB external drives. These are the companies least likely to embrace the cost increase of an SSD.
Seagate, the company that manufactures over 50% of the world’s enterprise HDDs, has no manufacturing facilities in Thailand. Western Digital (WD) has the greatest exposure, and is not a significant force in the world of enterprise HDDs.
[Shortly after this post was originally published WD announced its December quarter earnings and unit shipments, giving quantitative argument that this approach is being taken. The table below shows WD’s quarter-to-quarter unit shipments decline by drive type:
This table is ranked by growth to underscore the fact that the enterprise business underwent the smallest decline. One effect of this was that WD’s average selling price rose by 50% during this period.]
Just to repeat our position in the early November post, the flooding in Thailand, although a significant humanitarian tragedy, is unlikely to have an important impact on the SSD/HDD dynamic.
Objective Analysis has published a report on the enterprise SSD market that thoroughly explains the interplay between enterprise HDDs and enterprise SSDs. Our Enterprise SSD report can be purchased for immediate download at the Objective Analysis website.