[News] AI Market Growth Rescues HDD, Driving Half-Year Price Surge of 20%

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The surge in demand from the artificial intelligence (AI) market has sparked a substantial need for data storage. Coupled with HDD manufacturers reducing supply due to market conditions last year, the shortage of high-capacity HDDs since the second half of last year has led to overall HDD price spikes. Industry sources cited by TechNews have pointed out that from the third quarter of last year to the first quarter of this year, HDD prices have risen by a cumulative 10%-20%.

According to a previous report from Nikkei News, despite HDD’s competitive advantage in lower cost per storage unit, SSD has been gradually replacing HDD in the mainstream consumer PC market for storage devices below 2TB. This shift is driven by SSDs’ access speeds that surpass HDDs by nearly 10 times, coupled with the recent decline in NAND Flash memory prices, which has narrowed the cost gap between the two technologies.

Previously, TrendForce projected a strong 13–18% increase in Q2 NAND Flash contract prices, with enterprise SSDs expected to rise highest. Despite Kioxia and WDC boosting their production capacity utilization rates from Q1 this year, other suppliers have kept their production strategies conservative. The slight dip in Q2 NAND Flash purchasing—compared to Q1—does not detract from the overall market’s momentum, which continues to be influenced by decreasing supplier inventories and the impact of production cuts.

However, according to industry sources cited by the same report, the global economic downturn in 2023 and the resulting decline in server demand have led to losses even for suppliers of smaller-volume HDDs. Consequently, manufacturers implemented production reduction strategies, reducing capacity by 20% in hopes of stabilizing HDD prices.

Despite this, the burgeoning demand in the AI market since early 2023 has sparked a surge in demand for high-capacity HDD products. As suppliers have not announced plans to increase production capacity, industry sources cited by the report predict that the supply shortage for large-capacity HDD products will persist throughout this quarter and possibly extend for an entire year.

The report further cited sources indicating that HDD prices are expected to continue rising in the second quarter of 2024, with a potential increase of 5% to 10%. Sources also indicate that HDD prices have remained stagnant amid SSD competition. Reportedly, suppliers are unlikely to expand production immediately to sustain the upward price trend of HDDs. Therefore, the timing of HDD price stabilization hinges on developments in the artificial intelligence and high-performance computing markets.

(Photo credit: WDC)

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