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Hard Drive Shipments Declined 4.5 Percent in 2011

Hard disk drive production in Thailand that was shut down by severe flooding last October will not return to pre-flood levels until the second half of 2012, according to researcher International Data Corp. (IDC).

Worldwide shipments of hard disk drives (HDD) declined 4.5 percent in 2011, due in large part to flooding in Thailand which shut down production facilities of Western Digital and Toshiba, as well some factories of drive component suppliers.

The disruption of HDD production resulted in tighter hard-drive supply, causing drive manufacturers to increase prices over the last several months, IDC reported. Higher drive prices mean year-over-year HDD revenue growth will exceed shipment growth in 2012, a precedent for the industry.

The drive industry will have a compound annual growth rate (CAGR) of 8.6 percent from 2011-2016 when drive industry revenue will approach $50 billion, according to IDC. Unit shipments of hard drives will grow 7.7 percent in 2012 over 2011, and post a 9.6 percent CAGR from 2011-2016.

"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 HDD manufacturers to slowly reduce HDD prices from current levels to a level that will guarantee manufacturers will have the funds to invest in improving drive capacity, performance and reliability.

However, long-term revenue growth will only be realized if drive makers “transform into storage device and storage solution suppliers with a broad range of products for a wide variety of markets," noted Rynding.

The storage needs of customers are changing. While PCs will continue to represent the largest market for HDDs in terms of unit shipments, revenue derived from HDDs shipped for PCs will decline over the next five years. However, HDD demand from personal storage, entry-level storage, and enterprise applications is rising, according to IDC.

This reflects the trend of storing more content in large datacenters and centralized storage devices in the home or in small businesses. Doing so makes content accessible to a wide range of consumption platforms, including media tablets, smart phones, PCs, and other connected wireless devices, IDC reported.

The longer-term implication is that enterprise storage – instead of storage in PCs and consumer electronics devices – will at some point become the major consumer of HDDs, according to IDC.