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Demand for hard drives increases in 2007

HDDs are in vogue again

The hard-drive business rebounded on both consumer and enterprise demand in the third quarter of 2007.

The hard-disk drive (HDD) market became profitable again in the third quarter of last year while consumer and enterprise purchases drove up both shipments and revenue, according to market research company iSuppli.

Consumer electronics makers put bigger drives in digital video recorders to meet demand for storing high-definition TV programming and enterprise vendors built more external drives for backup, iSuppli said. Those trends helped boost shipments to 138 million drives, up 19.6 percent from the second quarter. Combined revenue for all HDD suppliers grew even faster, up 22.2 percent to $8.8bn.

The turnaround, driven by growing demand, ended a dip in the first two quarters of 2007 that had led some observers to predict company takeovers, said iSuppli analyst Krishna Chander. For the time being at least, the industry is doing well and looks to remain strong this year, he said. iSuppli expects fourth-quarter numbers to show shipments up 6.9 percent to 147 million units. There are even shortages of some types of drives, he said.

Despite the high-profile introductions last year of flash-memory-based devices such as the Apple iPhone and the Asus Eee PC, more of the hard drives coming out of factories are now going into consumer electronics, according to iSuppli. Consumer products took up 17 percent of HDDs in the third quarter, up from 15.5 percent in the second quarter. That share will keep growing and reach 22 percent by the third quarter of 2008, the company predicted.

Flash memory has barely made a dent in laptops or servers, though by 2011 or so it could play an important role, Chander said. Solid-state storage doesn't produce heat or vibration the way HDDs do, which would be a good thing in densely packed blade servers, he said.

At the moment, more enterprises now are adopting storage devices with desktop-class hard drives for backup of less important data even as they keep using traditional, more expensive small computer system interface (SCSI) gear for mission-critical information, Chander said. That's helping to drive the growth in demand.

The biggest HDD maker in the third quarter was Seagate Technology, and in second place was Western Digital, according to iSuppli. Both companies made more money on their drives: Seagate's gross margin rose to 24.6 percent from just 21.6 percent in the second quarter and Western Digital saw a gain from 15 percent to 18.4 percent, iSuppli said. Profitability for both is likely to keep rising in 2008, the company said.


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