Hard drive shipments rose almost 21% in Q4 due to demand for portable devices.

February 22, 2006

Hard disk drive shipments jumped 20.9 percent in the fourth quarter of 2005, a research firm said Wednesday, signaling that growth in the personal and mobile devices market is more than making up for the decline in the personal computing market.

Hard drive shipments in the quarter reached 103.4 million, compared with 85.5 million units shipped in the same quarter in 2004, according to iSuppli, a research firm that tracks components. That marks a record and also shows continuing growth, iSuppli analysts said, as the prior record was 95.4 million units in the third quarter of 2005.

The news is good for hard drive makers, analysts said, noting that almost all HDD makers were “in the black” in the fourth quarter. A slowing computer market could hurt such makers, but the growing market for certain consumer electronics has created the record demand for hard drives (see PC Market Will Grow 10.5%).

“Products including MP3 players, personal media players, and digital video recorders are helping drive the growth of the HDD market,” said Krishna Chander, senior analyst for iSuppli. “Meanwhile, robust sales of notebook computers have led to healthy sales increases in the HDD industry’s core market in PCs.”

Innovation Driving Demand

There’s been innovation in portable computers and other devices that raises consumer demand for the products—and in turn, demand for HDDs. For example, Apple’s video iPod, introduced last October, led to a resurgence in sales of 1.8-inch drives, iSuppli said.

To be sure, flash memory appears to be encroaching on hard drive turf (see Top 10 Trends: Flash Memory). Flash has no moving parts, unlike hard drives, making flash drives more rugged. Flash is also smaller, making tiny devices like the iPod nano possible (see Apple Intros 1GB iPod Nano).

But NAND flash memory—the type used in popular devices like the iPod—is experiencing a market glut. Nam Hyung Kim, an iSuppli director and principal analyst, said in a report that excess supplies will last through early 2006, causing NAND prices to fall.

Major buyers overbooked NAND flash in the fourth quarter of 2005 due to fears of short supplies, Mr. Kim said, while sales for products that incorporate NAND have slowed in the current quarter.

Then again, Mr. Kim noted that the NAND situation is temporary.

“We don’t believe that the current glut represents a fundamental, long-term worsening in market conditions,” Mr. Kim said.