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HDD Market Suffers Q1 Shipment Falloff

El Segundo, Calif. — The hard-disk-drive (HDD) market suffered an unexpected first-quarter decline in unit shipments and the category endured lower margins due to lower average selling prices, according to industry research firm iSuppli.

The first quarter saw 114.1 million hard drives shipped, down from the 119.7 million shipped during the fourth quarter of 2006, iSuppli reported. The 114.1 million shipped was up compared with the same quarter in 2006, but iSuppli said it did not expect a shipment decrease over sequential quarters due to strong HDD demand from computer makers during this period.

Seagate remained the industry leader, shipping 39.5 million units for 34.6 percent of the market. Western Digital was a distant second with 21.5 percent of the market on 24.5 million units shipped. Hitachi GST, Samsung, Toshiba, Fujitsu and Excelstor filled out the remainder of the list, iSuppli reported.

Pricing pressure forced down gross margins across the board, with iSuppli stating that Seagate fell to 21.3 percent from 24.3 percent during the first quarter of 2006. Western Digital’s gross margin dropped to 15.7 percent from 19.3 percent during the same period. Hitachi GST also suffered financially posting a $150 million net loss for the quarter, up from the $46 million net loss it stated during the previous year’s quarter.

Analysts at iSuppli said these companies will be hard-pressed to increase margins in the coming year unless they exert a great deal of pressure on their component suppliers to reduce their prices. If this goal is accomplished, the HDD vendors could squeeze an additional 5 percent margin.

On the positive side, the lower HDD prices are enabling PC makers to lower prices and it makes HDD storage technology preferable compared with its more-expensive competitors like solid-state drives and flash memory, said iSuppli.

iSuppli Table: iSuppli Hard Disk Drive Supplier Ranking in the First Quarter of 2007 (Ranking by Unit Shipments in Thousands)