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Hard disk drive shortage takes aim at enterprise SAS, SATA in 2012

Analysts and vendors expect the hard disk drive shortage caused by Thailand floods to curtail availability of enterprise SAS and SATA drives until at least the second half of 2012.

SAS and SATA drives frequently used for backups, archives and less performance-sensitive primary data could remain in short supply through the third quarter and possibly longer due to the hard drive shortage caused by last year’s floods in Thailand.

The floods have had a more negative impact on cheaper high-capacity drives than higher-cost performance drives, and analysts and vendors predict that trend will continue through much of 2012.

Shipments of nearline (NL) SAS and high-capacity SATA hard disk drives (HDDs) designed for storage systems and low-end and midrange servers plummeted by 18% in the fourth quarter, from 8.8 million in the third quarter to 7.2 million, according to John Monroe, a research vice president (VP) in the data center systems group at Stamford, Conn.-based Gartner Inc.

Framingham, Mass.-based IDC estimated the industry would wind up 2 million to 3 million units short of HDD demand for enterprise “capacity-optimized” SAS and SATA drives between the fourth quarter of last year and the second quarter of this year.

“End users could see some delivery delays on, for example, 1 TB, 2 TB and 3 TB drives,” said John Rydning, an IDC research VP who tracks hard disk drives and semiconductors.

IDC expects significant improvement for capacity-optimized SAS and SATA hard disk drives by the third quarter. But Rydning cautioned that the inventory would be low with enterprise server and storage vendors and the distribution channel. He also said that a full recovery from the hard disk drive shortage might take an additional two to three quarters.

“You really don’t fully recover until the first half of 2013,” Rydning said.

'Mission-critical' drives for high-end systems expected to recover first

The situation should be better for the “mission-critical” 10,000 rpm and 15,000 rpm SAS and Fibre Channel (FC) disks that enterprise IT customers use in high-end server and storage systems. IDC expects the supply of “performance-optimized” HDDs to improve by next month, after the constraints from December through February.

“Mission-critical probably recovers first because there's so much effort by the industry to solve that problem, and it's a relatively lower volume,” said Steve Luczo, CEO at Seagate Technology LLC, the leading manufacturer last year of enterprise drives, during the company’s earnings call last month.

Luczo predicted the recovery would take longer for “business-critical” NL SAS and high-capacity SATA drives. “I think it's going to be a struggle for a while. Business-critical has been really impacted quite heavily,” he said.

More on the hard disk drive shortage

Slowed hard disk drive production threatens PC shipments

Disruption in HDD production affects vendors

Dell says shortage of PC hard drives could impact its revenue

Reduction in HDD supplies impacts desktop, notebook systems

Combining performance- and capacity-optimized drives, IDC research showed a 5.7% drop in enterprise HDD shipments from the third to the fourth quarter. Seagate (plus its Samsung acquisition), Western Digital (and its pending Hitachi purchase) and Toshiba shipped 14 million disks in the third quarter vs. 13.2 million in the fourth quarter of 2011, according to IDC.

But so-called “mission-critical” drives actually increased 9% over that span. Gartner research noted shipments of the 10,000 rpm and 15,000 rpm hard disk drives found in multi-user server and storage systems went from 7.9 million to 8.6 million from the third quarter to the fourth quarter.

Gartner's Monroe attributed the uptick to the depletion of the mission-critical HDD inventory at the just-in-time hubs and warehouses that drive makers maintain to service major enterprise server and storage vendors. That inventory dropped from its normal average of 3 million to approximately 1 million during that time, he said.

“I don’t think we'll see normal inventory levels throughout 2012,” Monroe wrote via email. “I’ve been told the new normal for mission-critical will be 1 million inventory -- never again 3 million. It’s just too expensive for the drive makers to provide that level of high-end ‘accommodation.’”

Monroe said the change will force the top eight server/storage OEMs to be more disciplined in their forecasting and ordering of mission-critical HDDs in the future. Dell, EMC, Fujitsu, Hewlett-Packard, Hitachi, IBM, NetApp and Oracle buy approximately 90% of the mission-critical SAS and FC HDDs, Monroe said.

Those vendors plus Apple, Facebook, Google and Microsoft get most of the business-critical SATA and SAS hard disk drives of 7,200 rpm or less that are used in mid- to low-end servers and external storage systems. OEMs take about 65%, and distributors and secondary OEMs get the remaining 35%, according to Monroe.

“The people that are buying from suppliers outside of the top eight are probably going to be the most hurt [by enterprise hard disk drive shortages],” Monroe said. “As in any allocation, the big dogs are going to eat first.”

HDD scarcity to continue through 2012

Some enterprise IT customers have already noted diminished hard disk drive availability or delays in certain types of drives even from the top eight suppliers. For instance, UCLA’s Institute for Digital Research and Education (IDRE) recently waited two months rather than the usual two to three weeks for the delivery of 180 TB worth of 3 TB SATA drives from HP, according to Scott Friedman, IDRE’s chief technologist.

Dean Flanders, head of informatics at the Friedrich Miescher Institute (FMI) for Biomedical Research in Basel, Switzerland, said his IBM reseller asked if he would substitute 900 GB 10,000 rpm SAS disks for the 1 TB 7,200 rpm NL-SAS drives he originally ordered in December for a new IBM DS3524, an array that IBM rebrands from NetApp.

Gartner predicts the HDD industry won’t fully recover its pre-flood capacity until late in the third quarter or early in the fourth quarter. Monroe’s research shows that total HDD shipments plummeted 31.6% -- from 175.8 million to 120.3 million -- from the third quarter to the fourth quarter of 2011.

Englewood, Colo.-based IHS iSuppli Corp., however, doesn’t foresee supply problems for drives of any type going beyond the third quarter. IHS statistics pegged the overall quarter three-to-quarter four HDD shipment drop at 51.1 million drives, or 29.3%, with 36% for desktop, 33% for non-PC/consumer electronics, 28% for mobile and only 3.9% for enterprise.

“The entire industry will be back up by the end of the third quarter,” said Fang Zhang, a storage systems analyst at IHS, “but the enterprise [recovery] will be sooner than that because most of the hard drive manufacturers have changed the product mix to increase the production of their enterprise drives.

“Supply for mission-critical drives will meet demand by the end of the second quarter, and supply for business-critical could be slightly behind, till the end of the third quarter,” she added. “However, prices may stay at an elevated level for several quarters, for the rest of 2012.”

Major storage vendors have issued warnings of HDD price increases of between 5% and 15%, as well as possible shortages and delays. During EMC’s Jan. 24 earnings call, CEO Joe Tucci said the company expects constraints in drive availability for “nearline” HDDs more so than “mission-critical” drives.

“Basically, the challenges of availability of hard disk drives [are] just something that we're going to have to work around," said David Goulden, EMC’s chief financial officer. "And we did work around it in Q4. We plan to work around it in 2012. While lead times will be a little longer for certain items than we would normally expect, we will get the drives to make our numbers.”

During NetApp’s Feb. 15 earnings call, CEO Thomas Georgens said the company didn’t see the full impact of the hard drive production loss until January. He said most hard disk drive vendors shipped drives to NetApp in excess of their initial estimates, although some drive types were unavailable and some spot shortages had an impact.

NetApp CFO Nicholas Noviello said the company forecasts “constraints and unpredictability of supply for certain types of drives to continue for a few more quarters.”

HP said the drive shortage was one reason its income dropped 44% and revenue fell 7% year-over-year in the fourth quarter of 2011. HP executives said the HDD shortages had little effect on its storage system, but hit its PC and server businesses hard because it could not fulfill all its orders.

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