Enterprise storage sees less impact from Thai floods

Higher-margin priority and existing contractual obligations limit effect of hard-disk drive shortage on businesses, says analyst, who notes adoption of solid-state drive remains slow despite restricted HDD supply.
Written by Liau Yun Qing, Contributor on

Thailand's recent floods will have a less serious impact on the supply chain for enterprise hard-disk drives (HDDs) compared to consumer storage as manufacturers place higher priority on the higher margin commercial storage business.

The series of floods last month crippled most of the hard-disk manufacturing factories in Thailand, leading to a shortage of HDDs. According to Simon Piff, associate vice president of enterprise infrastructure research at IDC Asia-Pacific, nearly all disk manufacturers in the country either were unable to operate at all or could only operate in a restricted capacity due to the floods.

With Thailand accounting for 40 percent of global HDD production in the third quarter of 2011, Piff said the market was expected to see a shortage of HDDs. IDC lowered its forecast of PC shipments in 2012 due to the expected shortage, while Dell also announced its hard-disk supply would be affected by the floods.

The supply chain for both consumer and enterprise storage will be impacted by the flood, noted. Gopal R., vice president of Asia-Pacific transportation and logistics Practice at Frost & Sullivan. The analyst explained that storage manufacturers typically targeted not only PCs but also mobile and enterprise systems, and added that 2.5-inch and 3.5-inch HDDs were also used in enterprise-targeted products.

"The supply chain of enterprise storage will be impacted due to the plunge in volumes [alongside] the more than 100 percent increase in the price of HDDs," said Gopal. "But due to contractual obligations of storage device manufacturers with larger companies, the impact on the larger enterprise solution providers will be less than those on smaller companies."

James Bagley, senior analyst and business development consultant at Storage Strategies Now, added that the HDD shortage will have a bigger impact on consumer devices than enterprise. He explained in his e-mail that the higher-margin enterprise storage business will get priority shipment. However, Bagley said, there was "no doubt that [overall] prices will go up and availability will be limited".

Piff agreed that the enterprise storage disk market was not expected to be as affected as the PC or personal storage disk market, noting that everything would be dependent upon "consistent demand from the markets".

He explained that the current disk market in the Asia-Pacific region, excluding Japan, is growing at 58.1 percent year-on-year in terms of terabytes shipped. While this growth is high, the IDC analyst said enterprise storage vendors would have sufficient stock to cater to the expansion.

"As a result of the floods and impact on the manufacturers, it is probable that some internal controls were placed upon the movement of existing stock to ensure that sufficient stock would be available for their client base," he added.

At the same time, manufacturers would produce limited volumes for which enterprise disk customers would be given priority, he said.

Despite HDD shortage, SSD uptake still limited
According to Piff, even if there was an extended shortage of HDDs, the adoption rate of solid-state drive (SSD) in enterprises was not expected to increase due to the current pricing levels of flash memory storage devices.

Even if the price of HDDs increases, the IDC analyst said enterprises would more likely invest in storage efficiency technology such as storage virtualization, thin provisioning and data deduplication which, Piff noted, companies in the region were currently underinvested in.

Bagley concurred that SSD would not see increased adoption due to the HDD shortage. He explained that in terms of terabytes of production capacity, flash memory foundries were "not in a position to make a dent" in the predicted 40 percent reduction in HDD shipments.

However, Frost & Sullivan's Gopal offered a different opinion. He noted that while SSDs were projected to be a standard option in two years' time, the process might be accelerated by the drought of HDD.

He added that some manufacturers were already increasing the volume of SSDs in their offerings due to the HDD shortage.

"So it is likely, given the impact of HDD shortages and prices as well as influence of DRAM price slump, SSDs uptake may increase more than anticipated," Gopal said.

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