From the 11/28/97 edition of the Singapore Business Times...
Disk drive price cuts seen hitting firms' earnings and it will depress value of S'pore drive exports: economists
THE sharp price erosion for disk drives will have an "adverse impact" on sales and earnings of disk drive companies next year, an industry research firm said.
This will in turn depress the value of Singapore's disk drive exports, which are denominated in dollar terms, economists here said. Disk drives are Singapore's single largest export product.
"The disk drive industry appears to be fully in the throes of another adjustment period," TrendFocus Inc, which tracks the data storage industry, said in a report from last week's Las Vegas' Comdex Fall computer show.
The firm said market leaders Seagate Technology and Western Digital had met analysts at Comdex to "explain the current poor industry conditions, the somewhat dim near-term outlook, and the financial under-performance that will likely result".
TrendFocus concluded that while unit sales should continue to see healthy growth, "revenues and profitability will be severely
affected" next year by falling prices.
Pricing has been tightly squeezed in both the server and desktop segments in the last two quarters.This quarter alone, desktop drive prices have already fallen 20 per cent, while average drive prices have fallen 8 to 15 per cent. This compares with normal price erosion of between 3 and 7 per cent during the Christmas quarter, TrendFocus noted.
The firm also said drive makers will likely find ways to cut component costs, which means flat or declining consumption of key components, including media and heads. With the current oversupply of media and a potential glut of heads next year, "this news is unsettling", said TrendFocus.
In terms of market segment, TrendFocus said demand for servers -- large central corporate computers -- was shifting from the high to the mid-range and low end, which use fewer disk drives per system than high-end servers. And the current oversupply situation for server drives will not likely improve until mid to late-1998.
In the desktop arena, the low-cost sub-US$1,000 (S$1,590) PC is squeezing disk drive prices, which will "vastly reduce profitability" for disk drive suppliers.
These machines also use cheaper, smaller drives, further squeezing margins. But on the positive side, this will lead to a growing market for replacement drives in a year or two, TrendFocus said.
And portable computers' high prices -- as much as 300 per cent higher than desktop PCs in some cases -- are causing buyers to turn to desktops as an alternative.
"Consequently, (portable) drive shipments have not grown as originally expected," the firm said |
