The disk drive industry is strongly tied to the ups and downs of the PC market, but disk drive manufacturers have yet to learn how to handle the severe price erosions that both markets have been seeing, according to Noboru Kubokawa, chief analyst at Japan's Institute of Information Technology.
Both markets showed healthy unit sales growth in 1999 -- PC shipments were up 14.8 per cent over 1998 at 105.6 million units, while disk drive shipments rose 22 per cent to 178.9 million units over the same period, Kubokawa said.
PC sales revenues remained flat because of the steep price erosion, but the PC industry remained healthy and optimistic about the future. The disk drive market suffered from a phenomenon known as over-technology, Kubokawa said.
"Over-technology is the key problem," he said. "It means delivering technology at a higher level than users demand."
Disk drive manufacturers have consistently delivered over-technology, Kubokawa believes. In 1997, the average number of separate disk platters per drive reached an industry high of 3.1, keeping drive prices high and masking a precipitous fall in the price per platter. The strategy led to a decline in unit sales and a continuing erosion of profit margins.
Since then, although average storage capacity per drive has grown by 60 per cent per year, the platter/drive ratio has fallen to 2.4, indicating that manufacturers are beginning to realise the problems posed by over-technology, according to Kubokawa.
Kubokawa estimated that sales of disk drives would rise 16.4 per cent this year to 202.5 million units, of which almost 90 per cent would go into desktop or mobile PCs, with the remainder going into workstations, disk arrays and consumer devices.
Even though manufacturers are unable to raise prices for new generations of disk drives, Kubokawa sees the overall outlook as optimistic.
"Demand is healthy and the manufacturers are moving towards being profitable even with the price erosion," he said. "The new applications with their extra demand will come in a few more years, and the important thing for the disk drive manufacturers is to keep profitable."