Seagate was given a bloody brusing at the hands of the dismal economy last year. In Q1 2009, the HDD (hard disk drive) market took a steep nosedive and plunged almost 35 per cent.
It sent the industry into shock, and Seagate was badly affected. Not surprising, since most of the hard disks in the world are made by a few players like Seagate, Western Digital, Hitachi, Samasung and Toshiba, of which the first two have the lion’s share.
“Imagine 40 million units wiped out in one quarter,” said Banseng (BS) Teh, sales/marketing VP and managing director of APAC, Seagate at their media update today. “It was the most disasterous quarter for disk drives ever.”
According to him, even during the previous tech recession in 2001 the 31-year old company never saw negative growth — at worst it was almost flat — but the market never shrunk, like it did last year, -1.4 per cent globally in 2009.
In a mass manufacturing tech business like this, idle plants due to no demand means big losses, and surviving the crisis means layoffs. And it was painful. Last year 2,000 jobs were lost when the Singapore Seagate plant at Ang Mo Kio closed down. I know two ex-Seagate engineer friends who were retrenched.
Well, it looks like Seagate has turned the corner, and their last financial quarter Q2FY10 reported just over a week ago was excellent. According to BS Teh, it’s not back up to their previous highs yet in early 2008 — about 10 to 15 per cent off — but it seems that the demand has recovered even beyond their forecasted projections. They seem confident that this year will be good.
With demand outstripping supply, Seagate probably does not have enough capacity to cope in the short term — it’s not a business where they can just resume production with a snap of the finger. It takes time to ramp production back on track.
When demand exceeds supply, price goes up — it’s just basic economics. And this means good profits for Seagate (likely other HDD players as well), and likely higher prices for customers.
In short, don’t be surprised if the price doesn’t drop for HDD at the next IT Show at Suntec in March this year. In fact, this should hold true for many tech products, I should think. Last year was probably the best time to get great steals at bargain basement prices.
