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Tablets Cut Into Hard Disk Drive Revenue

Growth is slowing for HDDs due to the increasing use of low-cost, portable devices and cloud storage, reports IHS iSuppli.

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The rising sales of tablet computers and the decreasing demand for PCs has cut into the hard disk drive (HDD) market significantly, with growth in HDD-based revenue expected to decline 3% this year compared to 2010, according to a new report by IHS iSuppli.

The primary culprit: tablet computing, which forgoes HDDs and has cut into consumer purchases of PCs. Gartner reported a 1.1% decline in PC sales year over year in the first quarter of 2011, and IDC, which uses a different methodology, reported a decrease of 3.2%. Analysts at both firms said users' embrace of tablet computers was the major reason for the drop in PC sales.

IHS iSuppli says revenue for HDDs, which includes drives for PCs and corporate or storage servers, is projected to reach $28.1 billion in 2011. While this is 4.1% higher than the $27 billion of 2010, the anticipated HDD growth is significantly lower than the 7% expansion posted by the industry last year. The firm predicts HDD revenue will gradually decline in the years ahead, falling to a 3.9% expansion in 2012, 2.8% in 2014, and 2.1% in 2015.

"We forecast tablets are going to have dramatic growth this year based on consumer spending projections," said Fang Zhang, analyst for IHS iSuppli, in an interview. "Basically the results of the study show consumers with limited budgets are choosing tablets right now."

Flash and solid state drives (SSDs) have eaten into the traditional HDD market as consumers turn to tablet computers, lightweight notebook computers, and smartphones for Internet browsing, streaming video, and sharing content.

Another factor in declining HDD revenue growth is more efficient cloud storage, as enterprises forgo on-premises storage for the cloud. The introduction of lower-priced drives with higher area densities, which is the result of constantly improving and evolving technology becoming more affordable, has also cut into HDD growth, Zhang said.

However, while consumer tastes have changed, the enterprise market for HDDs remains fairly strong, due to increasing demand for corporate PCs, server and storage virtualization, and the building of a cloud-based infrastructure by corporations. The enterprise HDD market makes up less than 20% of total volume, while the consumer side comprises about 65%. The remaining 15% is split among automotive, set-top boxes, airports, cameras, and MP3 players.

Although HDD revenue is declining from previous years, it will still continue to increase for the next four years, from about $28 billion this year to an estimated $32 billion in 2015, according to HIS iSuppli.

However, a recent study from the NPD Group had contrary findings to the IHS iSuppli and other industry reports. It said that declining PC sales were not based on consumer preference for tablet computers, but rather the launch of Windows 7--and the subsequent jump in PC sales it inspired.

The NPD report also found that 14% of new iPad owners (six months or less) decided to purchase an iPad in place of a PC. Over the past holiday season, that number dropped to 12%. Yet "cannibalization" of netbooks is down by 50% among recent iPad owners, compared to the early iPad adopters, the report said.

As the volume of corporate data continues to grow, IT pros keep investing in new storage usage technologies. Compression still ranks No. 1, according to InformationWeek Analytics' 2010 Data Deduplication Survey, though respondents rely increasingly on dedupe, as well as thin provisioning and MAID. Download it here (registration required).

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