HDD Capital Spending in 2012 and Beyond

In order to repair the damage to the HDD supply chain from the 2011 Thailand floods as well as meet the increasing need for digital storage the hard disk drive industry must continue to make investments in capital equipment and production facilities.  Future increases in HDD areal density as well as increasing unit sales will drive significant capital spending investments that will impact the revenues of companies such as Anelva, Hitachi High Technologies, Innovative Instruments, Intevac, KLA Tencor, Teradyne, Xyratex, Veeco, and many others in the next few years.

The 2012 Hard Disk Drive Capital Equipment and Technology Report provides 207 pages of in-depth analysis of technology developments and capital equipment spending to sustain the growth and development of the hard disk drive industry.  Some highlights from the 2012 report include:

169% growth in HDD capital spending is expected from 2011 to 2016, driven by three factors:  unit shipment increases of 167%, the introduction of new HDD technologies such as HAMR and the replacement and repair of equipment damaged in the 2011 Thailand floods.

Between CQ4 2011 and CQ4 2012 over $1 B in capital spending is expected to repair or replace equipment and facilities damaged in the Thailand floods.

HDD and component companies have more cash to invest in equipment and technology development in 2012 and 2013, due to higher drive demand, limited drive supply and higher HDD prices.

Total industry spending on capital equipment in 2012 is expected to be about $2.4 B with 72% of this spent on process equipment, 21% on production test and 7% on metrology.

Average HDD capital equipment spending per year between 2008 and 2016 is estimated at about 7.2% of HDD industry revenue, with this percentage increasing in the last years of this period due to new technology introductions.

HDD areal density has slowed to 20-25% annually but 3.5-inch HDDs with storage capacities of 12 TB and 2.5-inch HDDs with 6 TB are expected by 2016.

Lower AD growth will drive more components per drive and thus more capital spending on head and media production equipment in coming years.

Industry consolidation and recovery from the Thailand shortages will result in higher HDD prices than 2011 at least until 2014 and likely HDD prices will flatten out about 10-15% higher than in 2011—this will help fund expensive new technology transitions by 2015-2016 and increase areal density growth rates to 40+% CAGR.

The normal capital equipment cycle will likely be re-established by 2014.  Capital purchases in 2014 and later will be driven by increasing unit demand (assumed 14% annual growth) as well as the introduction of heat assisted magnetic recording in 2015 and 2016.

The 2012 Hard Disk Drive Capital Equipment and Technology Report is now available from Coughlin Associates. To find out more about this report please see the brochure at http://www.tomcoughlin.com/techpapers.htm