Hard Disk Drives Losing Battle to Flash Memory

Last week on Seeking Alpha, I pointed out that the hard disk drive (HDD) market will grow 12.5% in 2008 to 567 million units, and we project the shipments to reach 618 million units in 2009, a growth of 9%. Despite the growth due primarily to the growth of notebook PCs, hard disk manufacturers are rapidly losing market share to the flash memory suppliers and need to commit to advanced high density technologies to avoid further losses and consolidation.

The HDD market already lost the battle in the small form factor market such as MP3 and cameras to solid-state drives and risk further erosion in the 2.5-inch enterprise space. The major bright spot for hard disk drives is the 2.5-inch laptop market, and even there solid-state products are on the market that are slowly nibbling away at their dominance.

Fujitsu's disk storage business is up for sale. The market underwent significant consolidation in the late 1980s -- the number of hard disk drive manufacturers dropped from 136 in the 1980s to only 8 today.

Solid state drives, while priced at twice that of a comparable hard disk drive, offer significant advantages of faster speed, lower power consumption and less heat generation.

The oversupply of flash memory, which has hurt the semiconductor industry in 2008 will hurt the hard disk drive market in 2009. Evolutionary methodologies available to the HDD industry such as Discrete Track Recording (DTR) technology, which can offer areal densities of 500 Gbits per square inch and above, will be necessary to survive in this market.

Next week, watch for my article on the semiconductor equipment space, the key sector I have analyzed since starting The Information Network in 1985.

Comments

[Moon Kil Woong:]

Unfortunately hard drives will remain a mass storage product for years to come but you are correct compact products like notebooks will move towards flash. I think this is not the fault of hard drive manufacturers but with the attractiveness of flash memory which is smaller, more dependable, and faster. With costs getting more affordable we should commend the technical innovation not lambast the old legacy technology.

This is something the US auto industry should have learned by now. Have you ever looked at the legacy circuitry in your car? Have you ever noticed the big auto industry's engines are about 10-20 year old unimproved models? Every asian country now beats our auto industry because its executives can't think farther ahead than their next trip to the golf course by jet. If you think the autoworkers are overpaid I ask you, do you think a bailout will get rid of the execs. That's why it's such a bad idea. Pretty soon Mexico and Vietnam will make more fuel efficient reliable cars than the US. Very sad.

2008 Dec 19 05:08 AM

[johnnyvolvo:]

Storage needs are increasing exponentially with more and more people in essence "digitizing" their lives. Video and graphic images will drive the storage market. You may have a flash card in your camera - but you will store all those pics on a drive. Movies will eventually be digital instead of coming on a DVD - more storage needed.

Also as more people go online - the online companies will need to exponentially increase - storage. Businesses also produce volumes and volumes of material each year. They need mass storage because archival solutions will not allow them to do data mining and other essential processes.

I agree the netbook market - and eventually the portable desktop market will be dominated by flash - but drives will remain viable and a growth market for many years - unless they are supplanted by a new technology (always a possibility for any tech company). Flash drives will continue to get bigger and cheaper by evolution - and so will disk drives.

I have not analyzed the "sweet spots" (the capacities at which disk drive and flash manufacturers have the most sales volume, - and the points at which they make the most profit). Volume typically comes from lower capacity drives - profit from higher capacity drives.

Knowing that - as well as knowing how quickly those sweet spots are moving for both drive and flash manufacturers,and extrapolating where and when they will (eventually) converge will tell the real tale here. Your article needs another paragraph or two to be useful.

2008 Dec 19 10:36 AM

[mklein9:]

Storage needs are increasing insatiably. Sure iPods and phones, etc., use flash drives, but the source of their data are on hard drives, either on servers across the internet, or on your own desktop at home where you keep your 500 GB of music, soon to be 5 TB of videos and so on. That is where growth will continue unabated for hard drives. Cloud computing, on-demand video, faster broadband.. these and other technologies simply *increase* the need for very large data storage. Hard drives and flash memory overlap only in small markets; I'm not sure why you focus on that small overlap and decide hard drives are on their way out. Whatever technology gives the cheapest cost per byte of storage will be on one end of the data connection; small and low-power on the other. For any foreseeable future, hard drives are the former and flash the latter.

2008 Dec 19 02:06 PM

[tti_7:]

"Solid state drives, while priced at twice that of a comparable hard disk drive..."
TWICE is only after some extreme case selective comparison. The true cost comparison would be $/GB. It is true that when comparing an older and lower capacity HDD (old stock) to the best sweet spot of SDD, you would get "twice"; but this is the exception rather than the norm.

As of today, 19DEC08, the best $/GB for a portable class SDD:HDD is about 9X ($1.95 : $0.22). This is when comparing a 128GB SSD to a 500GB HDD ($249: $109).

When bringing in the desktop class of storage, the price ratio is more than 20X

2008 Dec 19 04:01 PM