EL SEGUNDO, USA: With global demand for PCs and other electronic products weakening, iSuppli Corp. now is predicting that global shipments of Hard Disk Drives (HDDs) used in these systems will be flat or even decline in the fourth quarter of 2008 compared to the third.

Due to rapidly changing circumstances, iSuppli has issued optimistic and pessimistic scenario forecasts for global HDD shipments in 2008 and 2009.

The optimistic outlook, which represents iSuppli's most-likely forecast, calls for global HDD shipments of 157.5 million units in the fourth quarter, essentially flat compared to 158.3 million units in the third quarter. Based on this forecast, HDD shipments in 2008 will amount to 593.2 million units, up by 14.93 percent compared to 516.2 million units in 2007.

However, based on iSuppli's pessimistic outlook, fourth-quarter shipments potentially could be as low as 149.4 million units, which would mean that the market will contract by 10 percent compared to the earlier forecast done in third quarter. The pessimistic forecast would result in 2008 HDD shipments of only 585.1 million units, up 13.4 percent from the prior year.

Both scenarios represent significant downgrades compared to iSuppli's preceding HDD forecast issued in September. iSuppli previously predicted shipments would rise 4.9 percent sequentially in the fourth quarter and 16.6 percent for all of 2008.

"iSuppli has reduced and rebalanced its 2009 forecast for PC unit  shipments and is reducing its outlook for sales of HDD-equipped consumer-electronics products," said Krishna Chander, senior analyst, storage systems, for iSuppli. "This is having a negative impact on HDD shipments, regardless of which scenario wins out. However, iSuppli for now is sticking with its optimistic outlook, given that the forecast fits in with recent predictions for the leading HDD makers: Seagate Technology LLC and Western Digital Corp. (WDC)."

Seagate in October predicted the HDD industry would ship 156 million units in the fourth quarter, while WDC's outlook, when extrapolated, amounts to about 161.7 million.

Uncertainty over 2009 mounts
While the fourth-quarter and full-year 2008 outlooks are in question, the year 2009 holds even greater uncertainty.

Unit growth could be as high as 6.8 percent according to the optimistic outlook, or as low as 4.3 percent per the pessimistic scenario. Based on the optimistic scenario, the HDD market is set to recover by the second half of 2009 in accordance with normal seasonal patterns, using Average Selling Price (ASPs) as a gauge of this recovery.

Bright spots
Regardless of which scenario wins out, the growth expected in HDD shipments and revenue in 2009 is being fueled by demand from the notebook PC and enterprise server segments.

HDD demand from notebook PCs will rise at a double-digit pace during the next few quarters. HDDs for enterprise servers will see low, single-digit growth.

"Although shipments seem to be robust in this uncertain economy, the revenue picture is more subdued," Chander said. "OEMs that traditionally purchase more components in the fourth quarter are reducing their procurement budgets, or are buying with low incoming inventory, resulting in reduced pricing for HDDs."

While maintaining shipment growth, the HDD makers will pay a price in terms of Average Selling Price (ASP) declines in 2009. HDD ASPs will drop to about $58 range in the second quarter of 2009 before recovering to the near $60 range late in the fourth quarter. This weak pricing represents a drag on the HDD industry as a whole, one that will make it harder to cut a profit.

Eyeing optical drives
The Optical Disk Drive (ODD) industry is expected to follow the same path as the HDD market but with some differences, since ODD demand is entirely consumer-driven with no exposure to the server segment.

Solid-State Disks (SSDs), which eschew rotating media in favor of flash memory for data storage, have marginally penetrated the notebook PC segment. However, amid tight consumer budgets, the more expensive SSDs may find fewer acceptances as buyers that are looking for value in their notebook PCs gravitate toward the lower-priced HDDs.

As the market recovery begins in late 2009, SSDs should reestablish themselves as viable challengers to DDs in the notebook PC market.