Enterprise-Class HDD Dynamics – An IDC Perspective

Excerpted from IDC Document #201478, “Worldwide Hard Disk Drive 2006-2010 Forecast: Record-breaking Years Lie Ahead.”

Author: Dave Reinsel, Director Storage Hardware Research

The Industry in Aggregate

Calendar-year 2005 was a record-breaking year for the HDD industry from two perspectives: units and revenue. Surpassing the 2004 unit shipment record is no surprise, though the 24.4% increase to nearly 381 million drives surpassed all expectations. However, breaking the industry’s old revenue record has received little attention. In 1997, the industry generated $27.8 billion in revenue. 2005 revenue came in at $27.9 billion, when rounded. It was close, but a record-breaker, nonetheless. This dynamic should not be overlooked given the difficult years the industry experienced immediately following 1997. Many question whether the same trend can happen again, but IDC sees the future in a positive light.

The component constraints that emerged late in 2004 lasted throughout all of 2005, especially with respect to glass and aluminum substrates. The limited supply of components coupled with manufacturing constraints among the HDD vendors created an environment of undersupply, moderate price declines, and unprecedented revenue growth.

Lawsuits came and went with respect to newcomers Cornice and GS Magicstor, though the latter vendor continues to struggle in gaining any traction within the HDD marketplace. More significant, however, was Seagate’s surprise December announcement of its intentions to acquire Maxtor. With the closure of this acquisition, the WW vendor base is reduced to six major vendors, and three smaller vendors (Excelstor, Cornice, and GS Magicstor, in that order).

Several dynamics now taking place in the enterprise storage market will continue to impact HDD vendors through the forecast period. Many of these dynamics are specific to certain enterprise storage customers. Taken together, the result is a challenging environment for product positioning by disk drive manufacturers. Spinspeeds are changing as 3.5in 10K HDDs migrate to become 3.5in 15K HDDs – for certain customers. Other customers will choose instead to migrate from 3.5in to 2.5in 10K and eventually 2.5in 15K HDDs. As usual, nothing ever seems to happen as quickly as predicted (except price erosion) because there is a tendency for end users to hold on to tried and true legacy technology, especially in the context of enterprise storage.

Enterprise Storage Specifics

The fundamental driver for enterprise storage is data growth. IDC expects data will continue to grow at a strong, consistent, but manageable pace. As a result, HDD terabyte shipments (all interfaces) into all enterprise applications (server, storage, workstations) will grow at a compound annual growth rate of over 40% from 2005 to 2010.

In 2005, enterprise-class (read SCSI/FC/SAS 10K/15K) HDD shipments continued to break records. IDC reports that 26.2 million enterprise-class drives shipped in 2005, up from 22.8 million in 2004. Again, given the component and manufacturing constraints, a significant increase in ASP (up 9% to $190 in aggregate) helped to propel revenue to $5.0 billion, a near 27% annual increase.

The average enterprise-class HDD capacity increased to 105GB, up 39% from 2004. 73GB drives (45%) easily were the sweet spot capacity, pushing 36GB drives (17%) to third position with higher-capacity 147GB drives taking over the 2nd position. The 16.5 million 10,000rpm enterprise drives that shipped represented around 64% of all enterprise-class drives shipped, down from 75% last year. At 19.7 million units shipped, SCSI remains the dominant interface. Fibre Channel (FC) drive shipments increased to 6.5 million, up from 5 million in 2004. Serial attached SCSI (SAS) drives are expected to ship in large volumes in 2006. Small form factor enterprise-class drive shipments equated to around 500,000 but should increase rapidly in 2006, as well.

Perhaps the most interesting dynamic in Seagate’s acquisition is how Seagate merges or manages Maxtor’s enterprise-class product portfolio. The migration path is clear: 3.5in 10K ‘ 3.5in 15K ‘ 2.5in 10K ‘ 2.5in 15K. The longevity of the 3.5in 10,000rpm drive is what is in question. How long will Seagate keep Maxtor’s 3.5in 10,000rpm SAS program alive? IDC believes the company will honor any commitments made by Maxtor, but ultimately will allow that particular enterprise-class HDD platform to fade away, albeit at a pace likely to be governed by its current customers.

Meanwhile, ATA drives increasingly will penetrate the data center as users learn how properly to deploy and leverage desktop-class, capacity-oriented HDDs in enterprise environments. IDC estimates roughly two million ATA drives shipped into storage arrays (those storage systems having three or more HDDs) in 2005 with an average capacity of approximately 290GB per drive. By 2010, over 15 million ATA HDD units will ship into enterprise storage arrays with an average capacity greater than 800GB. As a result, shipments of ATA TBs into enterprise storage arrays will grow at a compound annual growth rate of nearly 90% from 2005 to 2010 to support a tidal wave of new digitized information in data centers. Note that these numbers do not include the ATA drives consumed in one- and two-drive servers or high-performance workstations.

Figures 1 and 2 delineate IDC’s forecast regarding interface and spinspeed transitions for HDD units shipped into enterprise applications from 2005 to 2010. These figures include aftermarket units shipped as upgrades or replacements.


Figure 1
HDD shipments by Interface Share into Enterprise Applications 2004 – 2010



Figure 2
HDD shipments by RPM Share into Enterprise Applications 2004 – 2010



A Bit more on SAS

2006 should be the first year for significant volumes of SAS drives. Less than 100,000 SAS drives had shipped by the end of 1Q06. However, based on system OEM launch plans for new SAS-based solutions, IDC expects SAS HDDs to ship in the millions during the 2H06.

The adoption of SAS is somewhat correlated with 2.5in enterprise-class drives, though not entirely. The adoption dynamic is also correlated to internal versus external storage arrays. The benefits of 2.5in drives surround more efficient cooling, power conservation, and I/O density. The smaller SAS connector also is more advantageous when considering 2.5in drives. These dynamics, when considered in aggregate, provide a compelling integration strategy for internal server storage.

Today’s external storage arrays tend to focus on capacity – the more the better. 3.5in drives will always have a capacity advantage over 2.5in drives. Thus, if the priority is capacity, then 3.5in drives will be preferred. However, the fact that SAS silicon controls SATA drives offers a compelling dynamic. That is, a storage array can integrate both SAS and SATA drives on a single SAS backplane without any worries or costs related to bridging SATA drives. This has been an issue with Fibre Channel (FC) systems in the past. However, recent advances in the FC protocol have helped to mitigate this additional cost penalty of bridging SATA drives to FC. Also, HDD vendor willingness to provide high-capacity, low-cost FC drives prolongs the life of FC-based external storage. In the end, the transition to SAS will be stronger in internal storage and then progress to external storage over time.

The market for HDDs looks good across all segments within the industry, from enterprise storage, to PCs, to consumer electronics. The various HDD transitions within the enterprise market will be impacted by pricing, HDD vendor product portfolio decisions, and the success of storage system OEM product launches integrating the various types of drives available to them. There are benefits and compromises to any strategy. However, cost, convenience, and compatibility tend to be high on the priority list of end users.

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